IASB to release the long-awaited tome which could result, in years to come, in mum and pop businesses in Cairo speaking the same financial language as anywhere else in the world
In the bowels of a white modernist office building on London’s Cannon Street
sits a 300-page document with the potential to change the way 98% of companies
around the world do business, forever.
Destined to sit in the offices of accountants the world over, the document
contains a global accounting language aimed at helping SMEs talk to each other.
In July, the International Accounting Standards Board will release the
long-awaited tome which could result, in years to come, in mum and pop
businesses in Cairo speaking the same financial language as those in Tokyo,
Sydney, Delhi, St Petersburg or anywhere else around the world.
The document, at least six years in the making, could act as the Rosetta
Stone of global small business accounting.
With the release imminent, Deloitte’s senior technical partner Ken Wild could
be forgiven for suffering from a case of déjà vu.
He remembers when international financial reporting standards for listed
companies where released with the aim of providing a second accounting language
to complement, rather than replace, individual national standards.
‘It was the second language for listed companies, but it took off in a way
that none of us expected and became the first language,’ he said.
He remembers when the European Union decided to force its public companies to
adopt IFRSs in 2005 which sparked a world wide revolution. Like falling
dominoes, nations around the world adopted the new standards. Today 113
countries subscribe to the rules with more coming on board each year.
But it won’t be Europe leading the charge this time round. Only last week EU
commissioner Charlie McCreevy spoke of ‘mixed’ and ‘negative reactions’, which
prevented him from expressing a view on the new standards.
Similarly, peak European financial representative group, Eurochambres, was
less than enthusiastic about the standards when it penned its submission on the
IASB ‘s proposals in 2007.
‘There is no need for [SMEs] to make an additional financial report based on
international reporting standards,’ the body said.
If SME standards do take off it will likely be driven by developing nations.
Emerging economies have so far led the push eager to adopt the high-quality
standards and avoid the cost of developing their own.
South Africa was so enthusiastic about the new standards it adopted the draft
code in October 2007.
Also rumbling near the surface is a growing uncertainty about the IASB’s role
in maintaining and revising SME standards.
Fears are quietly being expressed that the IASB board does not have the
hands-on experience with SMEs to adequately review and scrutinise the standards.
For its part, the IASB said it will conduct a thorough review of the standard
after two years, and address ongoing issues every three years. The organisation
spoke with over 100 SMEs in 20 countries in the lead up to the new standard ‘s
release.
For Wild, the success or failure of the standards will never result in the
total elimination of regional differences in accounting languages or what he
likes to describe as international accounting ‘accents’.
‘I don’t think you will get it 100% harmonised. You will always have
different accents,’ he said.
‘The underlying principle is that people in different countries should be
able to communicate. If people think it is convenient it will take off. Market
forces will see to that.’