The world may not like it, but Uncle Sam wants to ease its way into adopting international accounting standards.

Recently the Securities and Exchange Commission said it would decide in 2011 if it would adopt international standards, adding that adoption would not come before 2015. The proposition seems simple enough, but even though the International Financial Reporting Standards are used--or soon to be used--by more than 110 countries, the United States is the only major economy that's holding out.

"This touches on the fundamental question of what works best for investors, and what works best is adherence to the principals of transparency, objectivity and reliability of information," said Blaine Aikin, president of fi360 and a member of the Committee for the Fiduciary Standard, "And now that the markets are so closely interrelated it's absolutely essential for there to be common standards."

International accounting groups like the Institute of Chartered Accountants in England and Wales have criticized what it sees as the SEC's lack of meaningful committment. The ICAEW, which has members in 162 countries, said the agency's "current cautious approach does not offer the much-needed certainty required by U.S. companies and the many jurisdictions still in the process of making final decisions about switching to IFRS reporting."

Even so, Tom Jones, the director of the Center for the Study of International Accounting Standards at Pace University, is optimistic about the U.S.'s eventual adoption. "Chairman Mary Shapiro is trying to reassure other countries that have hounded the U.S. that they're still serious, while also signaling that companies will not be forced overnight to a very expensive change," Jones said.

Arleen Thomas, a senior vice president with the American Institute of Certified Public Accountants, holds a similar view. "I applaud the SEC for going through a thoughtful approach," Thomas said, "It's important and one we should do, but it should be done thoughtfully." Thomas' only criticism was the lack of a defined date. "I would have liked to have seen a certain date. People react to dates and deadlines and I'm disappointed in that fact."

Thomas said that it takes about five years to make a conversion. "In your first year of adoption you have to prepare three years of financial statements under IFRS," Thomas explained. "If we adopted December 31st, 2015, we'd also have to state for 2014 and 2013. It would probably take two years of planning and training, and that backs us up to 2011, which is next year."

The IFRS is seen as clearer and more principal-based than the Generally Accepted Accounting Principals, or GAAP, used in the United States. Principal-based accounting is driven by a conceptual basis for accountants to follow, rather than a specific list of requirements under a rule-based system. It's practical application produce widely different results. "When you set a rule, you can get around it, whereas when you set a principal, you can't get around it," Jones said.

In the United States, if a company has a product they want to sell, but are concerned whether it meets the standards of the Financial Accounting Standards Board, they will tweek the product until it does. "Both systems start as 'principal-based', but the a rule-based system develops when you allow all of these additions, clarifications and interpretations," Jones said.

The issue isn't new. In 2008 the SEC offered a roadmap for companies with market values greater than $700 million to adopt international standards by 2014. But since the financial crisis the United States has come under greater pressure to fall into line as the rest of the world has grown impatient. Having dual-standards is very costly for companies with operations overseas because it forces them to practice duplicate bookkeeping.

By dragging its feet, the U.S. runs the risk of losing some of its historically strong influence on the board of the International Association of Standards Board. The move to international standards isn't without support at home. The U.S. Chamber of Commerce supports the move, arguing it would better enable businesses to raise capital, not to mention cross-evaluate domestic and international firms.


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