At an industry conference Friday morning, Financial Accounting Standards Board chairman Robert Herz said he expects that U.S. companies eventually will be made to follow a single accounting standard. That standard, he said, would be International Financial Reporting Standards, not U.S. generally accepted accounting principles.
Herz said he is looking for an “orderly way” to get to a single accounting system and that a national plan would be the way to go about it. The plan would consist of timetables, tasks, and education efforts to move American companies off U.S. GAAP and onto a single global standard. “I don’t believe in a two-GAAP system,” he said.
The FASB chairman said he objects to providing U.S. issuers with an “unfettered choice” between GAAP and IFRS because it undermines his goal of getting to a single standard. The choice may appeal to some companies, he said, but the standards are written for the benefit of investors, not companies.
Neither Herz nor Thomas Jones, vice chairman of the International Accounting Standards Board, would give a date on which they thought convergence would be completed. But speaking in New York at Financial Executives International’s annual conference on financial reporting and convergence, Herz said the completion of FASB’s current codification project, which is slated to be finished by 2009, would be a major step in moving to a single global standard.
One aim of FASB’s codification project is to simplify GAAP and, therefore, bring it closer in line with the more principles-based IFRS system. Currently U.S. GAAP consists of 25,000 pages of standards and guidance, while IFRS has about 2,500, remarked Herz. Jones agreed with Herz that companies need to move to one set of standards, commenting that “principles are the issue.”
Herz did note, however, that FASB has a significant amount of simplification work to do, especially on pensions, leases, revenue recognition, and financial-statement presentation.