Coming to you soon – a world where US national domestic issuers and multinationals abandon US accounting standards to report under international financial reporting standards. Get that: US companies using IFRS.

In three rapid-fire moves at the end of April the possibility of one true set of global accounting standards moved distinctly into view. At their political summit meeting held in Washington on 30 April, US president George Bush and two European leaders – Angela Merkel, president of the European Council, and José Manuel Barroso, president of the European Commission – resolved to work to promote transatlantic economic integration under six headings, including financial markets. In particular, they resolved to promote conditions for US generally accepted accounting principles and IFRS to be recognised in both jurisdictions without the need for reconciliation by 2009, or possibly sooner.

A week before that, the chairman of the Securities and Exchange Commission, Christopher Cox, announced plans to get rid of the need for any non-US company with a US listing to reconcile its reported figures to US GAAP. This is an intriguing prospect. Cox says the SEC is on track to eliminate reconciliation by 2009. The SEC went on to add, “Because the elimination of the reconciliation requirement will permit some, but not all, registrants to have a choice between IFRS and US GAAP, it raises the question whether all registrants should be able to report under IFRS or US GAAP.”

At the same time that Cox was promising to eliminate US/international GAAP reconciliation by 2009, the SEC was signing a protocol with the UK’s Financial Reporting Council and the Financial Services Authority to share information on companies’ application of IFRS.

Vote of confidence
So game, set and match to the standard setting body behind IFRS, the International Accounting Standards Board. Well, maybe, but the IASB should not be taking anything for granted. It does see the move by the US government and the US regulator as an endorsement of the quality of the standards which it is producing. The move by the SEC is seen as another vote of confidence in the IASB and a reward for the progress it is making.

But the IASB should not get carried away. It still needs to work with the US Financial Accounting Standards Board in what both perceive to be a genuine partnership improving global financial reporting.

More worryingly for the IASB it still faces some searching strategic questions. Speaking as the news of the SEC’s next steps and the SEC/FRC/FSA protocol was breaking, John Tiner, chief executive of the FSA, was making a speech entitled ‘Harnessing the market through principles and disclosures’. He remarked that US accounting standards are perceived “as a highly detailed set of rules where every standard has exceptions to the principle, with hundreds of pages of interpretations and guidance, and specialist application of the standards for various arcane industries.” This is because they are rigorously enforced by the SEC and presumably that tough process will carry on whatever the GAAP being used.

While making it clear that he was not criticising US standards, and that the convergence process would help the drive towards more principles-based standards, Tiner added that “there are dangers in a focus on convergence as an end in itself.”

According to Tiner there is a widespread and growing concern across Europe that the costs of greater convergence may outweigh the benefits. “There is a sense that the IASB and FASB are seeking to converge on a model of financial reporting that is technically more complex than the framework that either follows currently. It would be better if they were to focus on simplifying the current model, both in moving towards principles, and in reducing the levels of disclosure.

“We need practical standards that reflect the way management runs the bu siness, and the standard setters should spend their time on the important work of making sure the current standards are effective before they embark on technical improvements in areas where there may not be evidence of a market failure.” A challenge for the IASB that the politicians may not care about, but an issue close to FDs’ hearts.