In a sweeping macro-view of major accounting issues poised to impact the profession, Financial Accounting Standards Board chairman Robert Herz said that the profession can get to a better reporting system, but it’s going to take some changes to get there.
Herz, who has served at the helm of the standard-setter since 2002, said that one of the first issues needed to be addressed was the complexity and volume of accounting standards -- an issue that eventually evolved into the board’s ongoing codification project.
“There was water coming out of a lot of spouts,” Herz told the New York State Society of CPAs during the group’s annual election meeting. “U.S. GAAP alone had 2,000 pronouncements so there were disparate standards that overlapped.”
In addition to meshing standards from a number of bodies such as the American Institute of CPAs and FASB’s Emerging Issues Task Force, Herz said that a bigger challenge would be to “write standards in a way that someone without an Oxford understanding of English can understand.”
Herz also admonished the “build-to-suit” strategy of financial reporting for different industries, pointing out to the crowd the 200-plus aspects associated with revenue recognition.
International convergence, the eventual fusion of U.S. GAAP and International Financial Reporting Standards, will move closer to the forefront later this year said Herz, when the SEC releases two documents -- a proposal to lift the GAAP reconciliation mandate for foreign filers already reporting in IFRS, and a concepts release which posits the question of whether U.S. filers should be given the choice between reporting in U.S. GAAP or IFRS.
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