Implementation Is Under Way
The International Accounting Standards Committee's role on the world scene took on greater prominence in 1997 when the International Organization of Securities Commissions agreed to sanction a core set of standards for use in global securities markets if they passed technical muster. In the process of developing those core standards, which are presently under IOSCO's technical review, it became clear that IASC's structure was in need of overhaul in order for it to be accepted as "the" international accounting standards setter.
A strategy working party in December 1998 proposed a new structure which, in the opinion of most U.S. observers, did not go far enough. Despite strong negative sentiments from some of IASC's constituents, especially in Europe, in 1999 the working party finalized its recommendations, which proposed a structure very similar to FASB's. Implementation started with the formation of a nominating committee, chaired by SEC Chair Arthur Levitt, that will name the first board of trustees, which in turn will appoint the members of the other structural elements of a new IASC.
"Overwhelmingly, U.S. market participants believe that there should be an immediate and concerted movement toward the development of international accounting standards" (Broadgate Associates survey, July and August 1999). Furthermore, 87% of fund managers surveyed said they believe that the International Accounting Standards Committee (IASC) is the body to develop a global accounting system.
"The current debate on the future structure of IASC cannot be separated from the financial reporting strategy discussions.... IASC should develop in a way that can be supported by different organizations and forums in Europe, otherwise it is difficult to see why and how Europe can give more prominence to international accounting standards if it cannot exercise proper i[fluence over the standards-setting process. IASC needs to become a truly global standards setter, meeting quality and independence requirements" [Federation des Experts Comptables Europeens (FEE) paper on a financial reporting strategy within Europe]. In FEE's view developments in Europe cannot be isolated from global developments.
"No one can take issue with the need for markets to converge on a common set of accounting standards. At the same time, it is critical to remember that a truly transparent and comparable system of financial reporting necessarily depends on the existence of a sound infrastructure. Accounting standards must rest upon a foundation that includes a quality process for developing those standards" (SEC Chair Arthur Levitt's announcement of a concept release on international accounting standards, February 16, 2000). The release seeks comment on a conceptual framework for global financial reporting.
The foregoing quotations illustrate the importance and emotional context surrounding the movement toward global accounting standards. This latest movement began in 1995 when the International Organization of Securities Commissions (IOSCO), of which the SEC is a member, reached an agreement with IASC on the development of a set of "core standards." IOSCO agreed that if its technical committee found the core standards acceptable, IOSCO would recommend endorsement of the IASC standards for use in cross-border capital raising and listing. The core standards were completed in 1999, and IOSCO's technical committee is currently evaluating them.
As the core standards were being developed, IASC recognized certain deficiencies and inadequacies in its organizational structure. In 1997, IASC named a strategy working party (SWP) to review the IASC structure and propose changes. A discussion paper, "Shaping IASC for the Future," was released in December 1998 to mixed reviews. FASB, the AICPA, and the SEC thought the recommendations did not go far enough in developing a truly independent standardssetting body. …