September 1999


A number of developments on the international accounting standards scene are worth noting.

Restructuring of the IASC. The proposed restructuring of the International Accounting Standards Committee (IASC) received a much needed boost at its June meeting in Warsaw, Poland when IASC Chair Stig Enevoldsen and Secretary-General Bryan Carsberg issued a compromise statement. Under the restructuring developed by the IASC's Strategy Working Party (SWP), an eleven- member Standards Development Committee, made up of full-time and half-time national standard setters would write standards that would be subject to approval of a 25-member-IASC Board. As reported recently in News & Views, there were strong objections from FASB, the AICPA, the staff of the SEC to the authority that would be given to the IASC Board to override the work of the development committee. The IASC received over 80 comment letters on the restructuring.

The compromise, which is not binding, will be considered by the SWP as it reviews all the comment letters and develops revisions for consideration at IASC's November meeting in Venice. The compromise suggests a 25-member board, with 15 full-time and 10 part-time members that would have full authority to develop and approve proposed and final standards.

IOSCO Continues Technical Review.
The International Organization of Securities Organizations (IOSCO), of which the SEC is a member, is in the midst of its technical review of the set of core standards established by the IASC. This assessment focuses on whether the core standards are of sufficiently high quality to warrant permitting foreign issuers to use them to access a country's capital markets as an alternative to domestic standards. A IOSCO committee commented on each standard during development and will assess how its concerns were addressed in the final standards. It will also evaluate whether the core standards work together to form an operational whole and the potential impact of the standards on investors, issuers, and the markets.

Ultimately, IOSCO will decide which standards will be recommended for use on a cross-border basis without condition, as well as those standards where acceptance may be subject to additional disclosures or other conditions.

IOSCO's Technical Committee will address unresolved substantive issues involving the core standards at its first meeting in 2000.

Vision for International Standards. Two partners of PricewaterhouseCoopers, Gerald M. Ward from New York and David C. Morris from London, in May 1999, published an extensive commentary on the need for global reporting standards. "One Global Corporate Reporting Standard: Nightmare? Dream? Or Reality?" proposes three possible scenarios: In the nightmare scenario, the U.S. and U.K. standard setters and IASC continue to independently set accounting standards that continue to become more and more complex. The interpretation and enforcement of standards varies greatly throughout the world leading to an erosion of confidence. Markets fail and regulators impose more and more rules. Over time, the standards revert to diversity because the regulators are now setting them.

In the dream version "a single global accounting standards setting body is established in which all national standards setters participate, and to which all national standards setters defer. The global standards setter is supported by a single global securities regulatory body. Over a reasonably short period, all home country financial reporting models conform to global accounting standards."

The third and final scenario attempts to present a realistic outcome that will lead to effective global standards. It takes the form of a call to action to the various constituents. Ward and Morris urge the major national standards setters, such as those in the U.S. and U.K. to give their full support to a bigger, better IASC. They are hopeful that the SEC will give the core standards a passing grade and allow them, even with reconciliation to U.S. GAAP, in U.S. filings by non-U.S. domiciled companies.

"Global accounting standards aren't just a dream," the authors conclude, "but very likely a reality." What is needed is the abandonment of the belief that any one of the existing systems has a monopoly on best practice, as well as the whole-hearted commitment of all interested parties to support the move to global convergence."

The November meeting of IASC and the actions of IOSCO in accepting the core standards will be major milestones along that path toward the reality that Ward and Morris are dreaming of. *

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