One set of global accounting standards to protect info

"I am pleased to see the G20 renew its call for a single set of high quality global accounting standards,” James S. Turley, the global chairman and chief executive officer of Ernst & Young LLP, said in response to the G20 communiqué.

Turley said: “The past 18 months have shown just how globally connected the economies of the world have become. Convergence is a critical step in countries moving to a single set of financial reporting standards. However, that alone will not achieve the goal of one global financial reporting language. All countries must ultimately commit to adopt IFRS (International Financial Reporting Standards).”

“If the world doesn’t coalesce and adopt common standards, then local political and industry influence are able to play one standard setter off of the other, creating a race to the bottom,” Turley said.  “That is a losing prescription for global economic growth and development, not to mention transparency to investors.”

Turley acknowledged recently that some companies view IFRS as an additional cost initially but many more see the value in having one set of global standards. A live poll of webcast viewers supported this with 92% believing a global accounting
standard desirable.

Hope for the future

Turley said the International Accounting Standards Board’s (IASB) Monitoring Board “was an excellent development” and said it was off to a good start.

He added: “As the Board continues to evolve, it must reflect the G20 – rather than G7 – view of the world” as business is moving in that direction. In response to webcast viewers questions, Turley acknowledged that there had been “some global anxiety that the US was cooling to IFRS,” but he added that he didn’t think this was the case.

Turley was encouraged by recent comments by the Securities and Exchange Commission (SEC). “I expect that discussion to be culminating over the next weeks and months,” he said.

Expanding on the issue, Ruth Picker, Ernst & Young’s Global IFRS leader, said: “One of the key pressures faced by the IASB is the potential conflict between the stated goal of convergence with the US Financial Accounting Standards Board and the demands of many in Europe for the IASB to see their needs as a priority. This pressure has intensified because the US has yet to commit to the adoption of IFRS.

She continued: “Until the US makes a commitment towards adoption of IFRS, the pressure on the IASB to lower the priority placed on convergence with the US will continue to build.”

A truly global standard?

Addressing people's concerns over whether IFRS is in fact a truly global set of standards, or is instead applied differently in each adopting country, Picker explains that some countries may have to call the standards by a different name because of local legislation. But in many cases, the text of the standards is identical to IFRS, as issued by the IASB.

She also noted that over the past five years, a body of interpretative guidance as to how to apply IFRS has developed, “greatly enhancing the consistency of application of IFRS around the world."

Turley commented: “The consistency in application of IFRS hasn’t just happened accidentally. It’s really important that there is a strong effort by the issuers, the accountancy firms and the regulators to help drive consistent execution. There’s not just one global standard; it’s actually a global effort to ensure that the standard is applied consistently by everybody.”

Do you think global accounting standards could help to protect economies from future financial meltdowns?  Share your ideas using the comments form below: