The groundswell of global support for international standards has a major new supporter: India.
That nation plans to adopt International Financial Reporting Standards by 2011, according to Economic Times, an India-based business publication. “A common accounting standard is in the interest of the investors who are exploring investment opportunities in other geographical areas as well,” the president of the Institute of Chartered Accountants of India, Ved Jain, told reporters.
Economic Times noted that more than 109 countries, including China, have adopted IFRS, and countries such as Japan, Canada, and South Korea are expected to soon follow suit. International Accounting Standards Board chairman David Tweedie said that by 2011, about 150 countries will have adopted IFRS, according to the report.
India’s continued leadership role as an outsourcing destination — including for finance and accounting functions — makes its push for IFRS even more important to the global movement.
Meanwhile, PricewaterhouseCoopers U.S. chairman and senior partner Dennis Nally called for a shift in accounting standards away from U.S. GAAP, toward IFRS, in a speech at the Union League Club in New York.
In his speech, Nally urged members of the Financial Executive Institute to embrace the rapid and often disruptive changes brought about by globalization as an opportunity to address systemic problems that impact America’s long term competitiveness, according to a press release.
He argued that global economic and cultural integration coupled with the rapid growth of emerging economies will demand more engagement and cooperation from the United States, citing the transition of accounting standards as a prime example.
“If we continue in the way we’ve always done things, the core foundation of IFRS will be eroded, he said. “The result will be that the U.S. will find itself out of step with the changes that the rest of the world is undertaking in financial reporting. American businesses, regulators and policy makers must behave differently over the next ten years, as we participate in ever-increasing discussions about the convergence of standards, rules, and principles.”
Nally reportedly argued that the transition from GAAP to IFRS is not only inevitable, but a positive development that would help make America’s capital markets more competitive. Transitioning to IFRS would allow U.S. companies to compete for capital in sectors in which non-U.S. companies currently report under IFRS, while reducing cost and complexity for American companies operating internationally, he said. He also noted that embracing a single set of global accounting standards would contribute to a higher degree of investor understanding and confidence.
“Where our own standards do not prevail, we should not necessarily assume that what does prevail will be at the expense of American business,” Nally stated.