Playing by the same rules

Convergence of international accounting standards is on the way. In an era when corporations span the globe and regulators want to leave the smallest possible scope for "favourable treatment", or loose application, it makes eminent sense for businesses everywhere to play by the same rules.

Achieving that goal, though, is another matter. For years, the International Accounting Standards Board (IASB) and the United States-based Financial Accounting Standards Board have been in discussions. They have made progress in aligning some of the International Financial Reporting Standards (IFRS) with the generally accepted accounting principles (GAAP) used in the United States.

But the timetable originally agreed by the European Union, US and other members of the G20 group to have a single set of high-quality global standards in place by mid-2013 now looks optimistic.

"Despite the production of a number of converged standards, so far they have been unable to agree on several significant projects," says Douglas Lau, Hong Kong director for the Institute of Chartered Accountants in England and Wales. "Good examples of that are the accounting standards relating to financial instruments, leasing and insurance contracts."

In large part, the hold-ups can be attributed to the financial crisis. There is broad unanimity on fixing the issues it brought to light, but opinions differ on priorities, detail and, in particular, where rules rather than a principles-based approach should hold sway.

With audit oversights and failure to report companies' true situations so obviously a contributory factor in the financial crisis, the US side prefers clear rules and less room for interpretation. Besides that, some of the more political considerations, linked to doubts about surrendering authority and jurisdiction, must still be overcome.