Magazine article The CPA Journal

Multiple Financial Accounting Standards Intensify the Dilemma of What to Teach

Magazine article The CPA Journal

Multiple Financial Accounting Standards Intensify the Dilemma of What to Teach

Article excerpt

Stalled Convergence Presents Challenges for Educators

With the prospect of a completely converged set of accounting standards seemingly no longer imminent, public accounting firms must face complying with different standards for different clients. Moreover, financial accounting instructors face the challenge of teaching multiple accounting standards in one course and fitting this additional subject matter into their curriculum. The discussion below considers the current state of convergence, how it affects the teaching of accounting standards, and what can be done to address this issue.

A Single Set of Standards

Currently, the sets of accounting standards that might be taught in college courses are U.S. GAAP and International Financial Reporting Standards (IFRS). In 2010, the SEC stated that it "has long promoted the development of a single set of high-quahty, globally accepted accounting standards," and, in February of that year, the SEC directed its staff to develop and execute a work plan detailing the incorporation of IFRS into the U.S. financial reporting system (http://www.sec.gov/ spoüight/globalaccountingstandards.shtml). Although the SEC was expected to decide the fate of IFRS in the United States in 201 1, it postponed the release of the final staff report until July 2012 (http://www.sec. gov/spolhght/globalaoeountingstandards^frs -work-plan-final-report.pdf), and its release does not include a firm recommendation.

The idea that IFRS should become the single set of global financial standards had been promoted for some time before the SEC developed its work plan. In May 2005, former FASB Chair Robert Herz stated:

The added costs from having to use this complex hodgepodge (different country reporting standards) of financial information can run in the tens of millions of dollars annually. In the international arena, they can act as a barrier to forming and allocating capital efficiently. Thus, there are growing demands for the development of a single set of high quality international accounting standards. ("In Search of a New Financial World Order," May 2005)

Diverse institutions supported this sentiment. For example, KPMG stated:

The current and growing breadth of IFRS adoption across the world suggests that IFRS has become the most practical approach to achieving the objective of having a single set of high-quahty, globally-accepted standards for financial reporting. Those who share this belief are influenced by the fact that the IASB's structure and due-process procedures are open, accessible, responsive, and marked by extensive consultation.

Defining Issues, no. 7-34, p. 1, November 2007)

And a presidential white paper on regulatory reform stated:

Accounting standard-setters (the IASB [International Accounting Standards Board] and FASB) need to continue to make substantial progress toward adoption of a single set of high quality standards. Improving and eliminating international differences in fair value accounting are key ingredients of regulatory reform of financial markets. ("Financial Regulatory Reform," White House White Paper, June 2009).

Moving Away From Convergence

Recently, the prospect of a single set of accounting standards has dimmed. In December 2011, former SEC Chief Accountant James Kroeker commented on the progress of FASB and the IASB's convergence efforts:

Based on the deliberations and tentative conclusions reached thus far, it is unclear whether the Boards will be able to reach convergence on key aspects of all projects. ... Further, the Boards' reprioritization of certain Joint Projects ... makes it unclear whether these projects would be completed in the foreseeable future and, if so, whether substantial progress towards convergence would be made before any Commission consideration of whether to incorporate JFRS into the financial reporting system for U.S. issuers (A Comparison of U.S. GAAP and IFRS, SEC staff paper, November 16,2011). …

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