Volume 13, No. 4

 

International Convergence: A Game Of Inches  If capital knows no borders, shouldn't financial information about companies be consistent across borders? For years, convergence of accounting standards between the United States and the rest of the world has been bandied about as the logical extension of globalized markets. Standards of the rest of the world has gradually come to mean the issuances of the International Accounting Standards Board (IASB). You'll be seeing those standards in plenty more foreign financial statements beginning January 1, 2005. That's when all companies in the European Union will be required to use those standards in their publicly-filed financial statements - something on the order of 6,000 companies. Another boost will come from Australia at the same time, as they institute the same requirement. Back to convergence: the U.S. accounting standards created by the Financial Accounting Standards Board (FASB) are not the same as the IASB standards, as you'd expect. Getting the two sets of standards synchronized will take years of work, a task begun in the mid-1990's when the FASB collaborated with the IASB's predecessor (the International Accounting Standards Committee) in writing a common standard for earnings per share. The two standard-setters committed themselves more fully to convergence of their standards in September 2002. The first fruit of that commitment is a series of proposed amendments to FASB standards that will make them more like existing IASB standards. They're small steps - just a few inches in a game measured in yards - but every one of them is superior to the existing practice in U.S. generally accepted accounting principles in subtle, surprising ways.

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