Fitch Ratings has released its annual outlook of issues it expects to continue having an impact on the accounting profession in the coming year.
Fitch’s “Accounting and Financial Reporting: 2007 Global Outlook -- Measuring Up,” says that the coming year will be all about measurement. Fitch says that the trend of increased restatements will continue, particularly in the United States, where increased scrutiny of financial reporting continues, as well as internationally, especially as more businesses and countries work towards the adoption of International Financial Reporting Standards.
The report says that the profession is still in the process of change, both in terms of accounting standards themselves, as well as in their implementation.
A year ago, Fitch’s annual report took a look at the effect global convergence of accounting standards would have, while noting that financial reporting covers a much broader spectrum than listed companies -- and this year goes so far as to say that cultural differences as to the understanding of why accounts are prepared is “probably the main obstacle” to full global convergence.
At a macro level, the report tackles several topics. Global convergence, conceptual frameworks, measurement, management judgment and corporate governance, and the old reliable -- the Sarbanes-Oxley Act -- all receive mention
In the second part of the report, Fitch offers its own take on the future of a number of issues, including the stock options scandals (more investigations and charges against companies are likely to come), fair value (the positive for credit analysis is substantial disclosure) lease accounting (the impact on credit ratings will likely be small), accounting for uncertain tax positions (to date, disclosure has not helped analysts determine how much of a tax charge they can be sure will become cash flow, or has been understated), among others.
The report is available for free download at www.fitchratings.com.
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