A Relentless Pursuit of Global Rules

Tom Jones, director of Pace University's international accounting center, looks forward to a world without local GAAPs.

The new leasing standard being released by [the Financial Accounting Standards Board] and IASB is a good example. It is more principles-based than U.S. GAAP. The fact is, you can so easily get around the existing U.S. leasing standard because the rules are detailed, and any financial engineer or accountant can find a way around a detailed rule. The new standard is very simple. It says if you have a long-term lease, you must record the liability, discounted, because it exists. There is no way around that. No one can say, “My lease is different.”

Will there be a shortage of IFRS-trained accountants and auditors in the United States if the [Securities and Exchange Commission] decides to replace U.S. GAAP with international rules?

On the one hand, there is a very sophisticated accounting environment in the U.S., with extremely long and complicated rules. The international standards are based on a similar framework and approach, but are much simpler. So it is hard for me to believe that the U.S. will have much difficulty making the transition. However, the training is clearly inadequate right now if the decision to move to IFRS is approved [by the SEC]. I teach international accounting at Pace University, but I have observed that generally, little is known about IFRS in U.S. colleges. That said, many large companies in the U.S. that are contemplating the change to international standards probably already are doing their own training today — likely relying to some extent on their overseas subsidiaries that are already staffed by folks that use IFRS and know it backward and forward.

How should the United States address the education gap?

In a sense, we are solving the problem through the convergence process, which is calling for changes to about a dozen major U.S. standards designed to bring together U.S. GAAP and IFRS. For instance, the revenue-recognition standard under the two [sets of] standards will be identical once the convergence project is complete. Nevertheless, a transition to IFRS will still be a big event in the U.S., because you are swapping out about 16,000 pages of rules and detailed interpretations for 2,500 pages based heavily on broad principles.

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