American Accountants can use International Financial Reporting Standards
Posted by iipaceo on 23 May, 2008
Accountingweb.com is reporting that the American Institute of Certified Public Accountants has voted to allow the use of International Financial Reporting Standards as an accepted part of American GAAP. The vote has the long-term potential to facilitate IFRS becoming a de-facto worldwide standard.
Not a Full Move to IFRS
In their press release on the matter, the AICPA point out that they are adding International Financial Reporting Standards to existing American Accounting Standards as an acceptable form of GAAP in which Companies can report. In practice this means that American Companies can continue to choose to report using American Standards, or choose to move to IFRS. In practice only time will tell whether there whether there will actually be a move to IFRS. While there may be advantages to a company that trades or is quoted on multiple stock markets in standardising on IFRS, there may not be a compelling reason for smaller companies in the US to do the same.
Why Could this be Good News?
A very strange thing happened in 1993. Daimler-Benz AG, the first German joint stock company to be listed on the New York Stock Exchange, issued financial statements under both U.S. and German GAAP. In the accounts produced under German GAAP the company reported a profit of 168 million Deutschmarks while under US GAAP they reported a loss of almost 1 billion Deutschmarks. So the obvious question is “which one is right”?
The answer could be “it doesn’t really matter” – the real issue is the confusion that such a conflict causes among investors, analysts, reporters, and anybody else who is trying to work out how the company is doing. Financial reports such as the Daimler do a great disservice to everybody involved. The key to the usefulness of accounts is their consistency so that they can be used for comparison purposes. So anything that helps clarity has to be good.
This is potentially great news – lets just watch how this plays out?
American Accountants can use International Financial Reporting Standards said
[...] uebhanyashuang wrote an interesting post today onHere’s a quick excerpt Accountingweb.com is reporting that the American Institute of Certified Public Accountants has voted to allow the use of International Financial Reporting Standards as an accepted part of American GAAP. The vote has the long-term potential to facilitate IFRS becoming a de-facto worldwide standard. Not a Full Move to IFRS In their press release on the matter, the AICPA point out that they are adding International Financial Reporting Standards to existing American Accounting Standards as an acc [...]