PracticeAuditCross Atlantic debate persists

Cross Atlantic debate persists

What is more at risk: US or European accounting? You could make a case on both sides that the most basic principles of the respective kinds of reporting were under threat

On the one hand, plans to adopt a US-style accounting for segments has
stirred up a hornet’s nest in Europe.

And last Wednesday I had the opportunity to attend a press conference at the
offices of the Financial Reporting Council, where SEC chairman Christopher Cox
voiced his support for IFRS and discussed the growing momentum behind
principles-based regulation and accounting in the States.

Cox said the SEC had been asked by the US Congress to research
principles-based financial reporting, and referred to the Enron disaster as the
prime example of the vulnerability of the rules-based approach favoured in the
US.

The SEC head also spoke with enthusiasm about the US watchdog’s pledge to
scrap reconciliation between IFRS and US GAAP for foreign issuers by 2009.

Cox didn’t sound like a man who would only accept convergence at the cost of
principles-based accounting. If anything, it seemed as if rules-based reporting
was more at risk. So who has more reason to be worried? Well, the fact that US
companies look like they may soon have the option to file under IFRS must mean
European standards-setters have the upper hand.

The fear will be that IFRS will, as with the segmental reporting standard,
simply become US GAAP by another name.

And there is a broader issue. If the world moves to IFRS, would we not simply
be moving to standards that, European, principles-based or otherwise, are
essentially disliked almost across the board for a whole host of other reasons?

Nicholas Neveling is a reporter on Accountancy Age

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