The IASC board meeting in Frankfurt on 14-16 December saw the culmination of a five-year marathon to prepare a core package of international standards. The final deadline may have slipped a few months, but if this ‘universal passport’ is accepted by the international stock exchange body IOSCO, companies will be able to prepare their accounts following IAS guidance and use them to seek listings on capital markets in other countries.
In 1998, the IASC is likely to have approved and published six new standards (plus a few consequent amendments) to wrap up the core programme – a feat that deserves and has won global applause.
There are some pessimists who still doubt IOSCO’s most influential member, the SEC, will endorse a set of accounting standards that could eclipse generally accepted US practice.
Although constrained by his position, SEC chairman Arthur Levitt has been dropping heavy hints of sympathy. In September, he criticised the corrosive tendency of US companies to distort accounts to match expectations. In November, he said that, by asking ‘hard questions’, the commission expected to play a full role in ensuring high-quality international financial reporting standards.
Further endorsements came in the shape of laws in Belgium, France, Germany and Italy that allowed national companies to to use IASs domestically.
In November, the UK Department of Trade and Industry confirmed that, following discussions with the European Commission, similar legislation would be considered as part of the company law review.
For public-sector accounting, where accruals-based techniques are becoming fashionable internationally, the International Federation of Accountants’ public-sector committee has published draft guidelines for governmental reporting, based on existing IASs. IFAC went ahead with the draft publication, even though the English ICA was not entirely convinced of IFAC’s conceptual model.
The ASB came out with four full financial reporting standards, plus an amendment to FRS 5.
A close examination of this year’s crop of FRSs and IASs reveals some notable overlaps – FRS 12 on provisions and FRS 14 on earnings per share are almost identical to their IAS equivalents. Differences remain in how UK accountants handle associates and joint ventures (FRS 9) and impairment and goodwill (FRS 10). The ASB broke more significantly with international consensus on how to value pension funds and openly expressed its preference for a ‘long-term’ financial instruments standard rather than the ‘interim’ version agreed by the IASC.
International harmonisation of accounting standards went a long way to becoming a reality in 1998.
While accountants may breathe a sigh of relief after so many massive changes, the standard setters face what could be a messy anti-climax.
Constitutional checks and balances could mean the IASC core package will take up to two years to complete.
When the outline proposals emerged last year, they were fired on by all sides. The EC’s head of accounting standards, Karel van Hulle, made a special point of criticising them.
If similar strategy proposals reappear at the next IASC meeting in March, the argument over valuing financial instruments will look like a playground spat.
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