Different requirements relating to goodwill, pensions, revaluations and other issues resulted in some big numbers in UK GAAP/US GAAP/IAS reconciliations. They still do, but the gaps are closing.
The current projects section on our own ASB website, the IASC website, and the US FASB website all look pretty much the same these days. Add in Australian and Canadian initiatives and it becomes clear that all the major standard-setters have a similar agenda. They are all dealing with business combinations, financial instruments, pensions, leasing and reporting financial performance. Many projects are joint efforts.
On the face of it, this is a shining example of how grown-up standard setters can co-operate effectively (if a little incestuously) at an international level, and the effects are already apparent in the UK. Two Discussion Papers recently issued by the ASB (on business combinations and reporting financial performance) have been reprints of Position Papers issued by the G4+1.
But the reality behind this outbreak of co-operation is that standard-setters have little choice.
The depth and complexity of the accounting agenda is increasing exponentially and for each standard-setter to draft, develop and consult on these issues individually and then attempt to develop an international consensus would be expensive, time consuming and ineffective.
Publicly, at least, all of the major standard-setters are committed to recognising IAS in their own standards, and even the EU has finally realised that getting behind IAS is a better idea than trying to create its own raft. IOSCO has been working for some time on a deal that would permit the recognition of IAS across the world’s Stock Exchanges, but progress has been hampered by some aggressive posturing on both sides of the Atlantic. Put simply, the US does not see why it should subordinate its own standards to IAS, which it regards as less rigorous than its own. And whether we like it or not, the US has little to loose by holding things up until IAS look a lot more like US GAAP than they do now.
At the end of the day, multinational companies operating in global economies need international standards and US money. A messy consensus is probably better than no consensus. Perhaps we need to face the fact that even if we end up with something that looks more like US GAAP than we would like, it would at least give everyone something to work with.
Elizabeth MacKay has worked for the Big Five and for regulators both in the UK and abroad. She writes and lectures on global audit and regulation.
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