Turf wars harm global influence

Ask any successful business leader about globalisation and they will tell you that unless organisations embrace its challenge, the UK could be pushed into the outer fringes of the international stage.

Ask any of the domestic accountancy bodies – from standard-setters to institutes – the same question, and the answer should be the same.

Don’t be too confident, though. The bodies are facing the accusation that they are too parochial, too UK-focused and in doing so are not best serving the needs of the profession.

One Big Five partner who monitors future trends, puts it succinctly: ‘Why would BP/Amoco be interested in something happening in one of its subsidiary countries? Regulation is territorial and the rise of international accounting standards will make bodies like the English ICA redundant.’

The bodies are adept at defending their current stance. The English ICA points out it represents more than half of the finance directors of FTSE-100 companies – the very businesses that are said to be consigning territorial boundaries to the dustbin of history.

Institute director for business performance Anthony Carey agrees that there is significant pressure for harmonisation within the big companies to enable FDs to explain their performance in different countries using the same accounting standards. But, he says, the institute is responding.

‘We have just set up a centre for business performance to look at developments relating to world-class business, while our technical director is an observer at the International Accounting Standards Committee. So we are very active in this area,’ he says.

ACCA says it is the only body that has been setting exams in international standards for more than a year. It says that the only way to remain relevant is to grow muscle abroad.

Last year, it launched a failed attempt to merge with CIMA and CIPFA but remains convinced that there needs to be a rationalisation among accounting bodies in order to present a more united image on the world stage.

‘The UN has adopted our syllabus as a benchmark which shows our relevance and we see ourselves as a global organisation which can represent the large corporates which are looking to have a consistent standard,’ says ACCA director of professional standards Andrew Harding.

The merger debate highlights another important issue that goes hand in hand with globalisation. Can the UK expect to share an equal voice in international accounting standard-setting when there are so many conflicting views between professional bodies?

Some Big Five partners argue that there are simply too many chiefs who all want to take the lead, and the profession is being marginalised during high-level UK government decisions because of the lack of a coherent viewpoint.

‘If that is the case at home,’ asks one, ‘then how can the UK profession hope to be truly represented and consulted when those decisions involve different countries?’ ACCA, which pushed hard for a merger with CIMA and CIPFA last year, would say this can only be done by pushing through its merger plans.

But CIMA, which successfully saw off ACCA’s advances, takes a different line. Only three weeks ago, it set out its own agenda by calling on competing institutes to shelve merger plans and co-operate to a greater degree in non-contentious areas, which could signal the beginnings of a major rethink in direction for the institutes.

The pace of globalisation does provide the profession with some mitigating arguments. Even the International Accounting Standards Committee is surprised by the speed at which global convergence is taking place, and other factors apart from international corporates are becoming increasingly important in governing the pace of change.

IASC senior research manager Peter Clark says foreign investment is also a major driver. Smaller listed companies receiving money from abroad are seeking to account in the same way. Meanwhile, the creation of the eurozone has formed a brand new capital market and the Asian crisis has made outsiders suspicious of local accounting methods.

‘There are a variety of reasons behind this interest in international accounting standards but it is happening much faster than I would have predicted even two years ago,’ says Clark.

And it is not just a case of ‘the Americans are coming’ either, he adds. Individual countries are joining together to work out what is best for them as the pressure to harmonise means companies are starting to question why a territory opts out of IAS unless there is a good reason for it.

Whether co-operation or consolidation is adopted as the way forward by professional bodies, it is clear more needs to be done in the profession domestically to respond to the sea changes going on outside on the global stage.

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