US signals move to principles-based accounting
The appointment of Bob Herz, as incoming chairman at the US Financial Accounting Standards Board, is the clearest signal yet that the US will move to a principles-based approach.
A senior partner in PricewaterhouseCoopers and a part-time board member of the International Accounting Standards Board, Herz signalled in today’s (Monday) FT that he wanted to bring the US rules-based process closer to a principles-based approach, used by the UK and the rest of the world.
Herz said: ‘I understand the US environment where there has been such a proliferation of rules. I like the principles-based approach but some people have exaggerated the differences. You are always going to have rules but the question is: “Where do you start?” You can never have a rule for everything and at that point you have to go back to principles,’ the FT reported.
The collapse of Enron and Andersen, which has led to a fundamental rethink of financial reporting in the US, has heavily contributed to the watershed.
Herz, will become FASB chairman on 1 July, when incumbent chairman Ed Jenkins steps down. He is well respected on both sides of the Atlantic for his expertise in technical accounting issues and is both a chartered accountant and certified public accountant.
FASB has been working closely with the IASB which is striving for a single set of internationally accepted accounting standards based on principles.