The Senate Banking Committee held a hearing on allowing U.S. companies to use International Financial Reporting Standards.
Among those testifying were Charles E. Landes, vice president for professional standards and services at the American Institute of CPAs. "The AICPA supports the goal of a single set of high-quality, comprehensive accounting standards to be used by public companies in the preparation of transparent and comparable financial reports throughout the world," he said.
The SEC has proposed allowing companies to report their results in IFRS rather than U.S. generally accepted accounting principles. The Financial Accounting Standards Board and the International Accounting Standards Board have been working on converging the different accounting standards, and have been making great strides in the effort, Landes noted.
Robert Herz, chairman of the Financial Accounting Standards Board, noted that convergence would bring great advantages. "We believe reaching this ideal financial reporting system would significantly improve the overall usefulness and comparability of reported financial information, increase investor confidence, and reduce the complexities and costs investors and companies face, resulting in global capital markets that function more efficiently," he said.
However, Herz said there are many challenges involved in developing such a system, including differences in regulatory and cultural environments, resistance to change, differing priorities among jurisdictions, and U.S. demand for detailed guidance and specialized industry standards.
"Wherever I go, I am always asked whether the United States will accept IFRSs," said Sir David Tweedie, chairman of the International Accounting Standards Board. "It is understandable that the United States is not among the first wave of IFRS adopters. The United States has a well-established and respected standard-setting body in the FASB. U.S. GAAP has served U.S. capital markets well and is a system of accounting that provides a high degree of transparency, has been tested over a long period of time, and has had a high degree of acceptance internationally. However, the world is changing."
He noted that the U.S. requirement for non-U.S. companies to reconcile to GAAP has caused resentment among those companies.
Also testifying were Conrad Hewitt, chief accountant of the Securities and Exchange Commission; John White, director of the Office of Corporate Finance at the Securities and Exchange Commission; Jack Ciesielski, president of R&G Associates; Teri Yohn, associate professor of the Keeley School of Business at the University of Indiana; and Lynn Turner, managing director of research at Glass Lewis & Co., and former chief accountant at the SEC.
