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Thursday 28 August 2014

US easing accountancy rules stance – watchdog

Huw Jones

Published 11/06/2014 | 02:30

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World leaders have called for a single set of global bookkeeping rules so investors can compare companies more easily. Photo credit: Thinkstock images
World leaders have called for a single set of global bookkeeping rules so investors can compare companies more easily. Photo credit: Thinkstock images

The United States may allow its companies to use international accounting rules while stopping short of making their use mandatory, a UK regulatory agency said yesterday.

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World leaders have called for a single set of global bookkeeping rules so investors can compare companies more easily.

So far, the US has declined to adopt the International Financial Reporting Standards, or IFRS, which are written by the London-based International Accounting Standards Board and used by many Irish companies. The rules are used in more than 100 countries and are mandatory in the EU.

"My view is that we won't get total harmonisation, that is having one set of accounting rules and standards across the world," Win Bischoff, the new chairman of Britain's Financial Reporting Council, which polices accountants and audit firms.

"There is increasing convergence – for example, the US Securities and Exchange Commission has allowed global companies listed in New York to use IFRS," Mr Bischoff told a financial conference.

Foreign firms listed in the US are not required to file separate accounts under US rules, known as Generally Accepted Accounting Principles, or GAAP, and Mr Bischoff said that flexibility could be expanded.

"I could see that American companies would be given the choice over a period of time. Will they stick to US GAAP? Probably, but I think the two standards are getting closer together."

There is talk in the accounting industry that the US Securities and Exchange Commission, after resisting a switch to IFRS, may propose in coming months giving US firms a choice of using IFRS or GAAP.

Prudence

Observers say some big global US firms would take up the offer, but domestically focused listed companies are opposed to mandatory use of IFRS.

Mr Bischoff also said he was against special accounting rules for banks, which some lawmakers have called for after taxpayers had to bail out lenders in the 2007-09 financial crisis.

But he does expect more emphasis on "prudence" in the accounting board's rules.

Some UK politicians, such as former chancellor Nigel Lawson, want to reinsert a reference to prudence in IFRS rules. The International Accounting Standards Board is discussing that, and such a reference is likely to be reinstated, a senior official in the discussion said.

However, the issue is divisive; accountants say bookkeeping is meant to be a neutral snapshot rather than make forward-looking judgments. (Reuters)

Irish Independent

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