Just like the Securities and Exchange Commission, the Financial Accounting Standards Board is thrashing around the notion of the emergence of a single set of accounting standards. On Wednesday—on the same day that the SEC proposed enabling foreign issuers to use international standards when they file their financials on U.S. exchanges—FASB officials were pondering how to go about the business of globalizing the standards.
Unique to the FASB meeting, however, was a concern that the supply of auditors serving small and privately held companies might not meet the demand in the face of massive changeovers of accounting systems
One thing for sure: accounting convergence isn’t going to be easy. Indeed, eliminating differences in accounting standards from country to country “is going to take many years,” Suzanne Q. Bielstein, who oversees convergence as FASB’s director of major projects, said at a meeting of the standards board’s Small Business Advisory Committee meeting on Wednesday.
Therefore, she said, the interim goal should be to eliminate the requirement of reconciling International Financial Reporting Standards and U.S. generally accepted accounting principles—an act that will “demonstrate that IFRS is an internationally accepted reporting language in every major capital market,” she said. Meanwhile, the SEC was unanimously approving a proposal to do just that by 2009.
At the FASB meeting, attendees were mulling a few far-reaching questions about the proposal, including what changes the move to international standards would bring to the CPA exam and to FASB itself, and whether it would further the concentration of public companies in the Big Four accounting firms.
Participants seemed to feel that the U.S. markets are unique in their breadth and speed—and therefore must regulate themselves. The need for FASB to continue to exist seems obvious, some felt, although its role will likely to collaborate more with international groups.
Another serious consideration is the burden that adopting IFRS will put on the U.S. CPA market, which already is tapped out for talent, some noted. That’s a big issue for small public companies, private corporations, and small accounting firms. “If it is allowed for public companies, it will trickle down to non-public companies, and it will have to be addressed,” said one attendee who works for an accounting firm.
The brain drain could become a serious toll of convergence. “In our firm and many others our staff can’t take the CPA exam because they just don’t have the time to study for it, and coming out of school they don’t have anywhere near the exposure to audit a client. It’s a huge issue,” the accountant said.