April 14th, 2011 by Mary Stucke
Sir David Tweedie, Chairman of the International Accounting Standards Board (IASB), gave a speech on March 10, 2011 in Washington, D.C. to the U.S. Chamber of Commerce titled “The Future of Financial Reporting: Convergence or Not?” It was a pretty long speech, but the main takeaway is that he believes 2011 will be the year in which the future of financial reporting is going to be determined (i.e. whether the U.S. will accept IRFS [International Financial Reporting Standards] to become the new standard over GAAP [U.S. Generally Accepted Accounting Principles]). The key things happening in 2011 are that it is the end of a nine year program between the IASB and FASB (Financial Accounting Standards Board) to improve IFRS and GAAP and get them closer to convergence, and the Securities and Exchange Commission (SEC) is set to make a decision on the use of IFRS by U.S. domestic companies.
Tweedie went on to talk about why he thinks there should be one set of international accounting standards, namely IFRS of course. The most compelling argument that he made is that “global accounting standards will enhance the drive towards the free trade of capital internationally.” I agree with this as it applies to companies that are publically traded or that do business internationally, but conversion to IFRS seems like a significant burden to small privately held businesses that do business only in the United States, which represents the majority of U.S. businesses. One of Tweedie’s other points was that 2011 is the best time to switch to IFRS since the nine year convergence project has GAAP and IFRS closer than they would be at any other time in the future, so the burden of changing standards would be the smallest at this time. But is it worth it? That will be the question facing all the bigwigs at the SEC and FASB over the next year. Only time will tell.
If you would like to read Sir David Tweedie’s speech in full, or if you would just like to see a picture of what Sir David Tweedie looks like and how serious his face was during his speech (what a great name for the head of international accounting), you can visit the IFRS website.