Sweeping Away GAAP
FASB's Herz calls for a national plan to wean U.S.
companies from their current rules-based accounting system.
Marie
Leone, CFO.com
September 28, 2007
At an industry conference Friday morning, Financial Accounting Standards
Board chairman Robert Herz said he expects that U.S. companies eventually will
be made to follow a single accounting standard. That standard, he said, would be
International Financial Reporting Standards, not U.S. generally accepted
accounting principles.
Herz said he is looking for an "orderly way" to get to a single accounting
system and that a national plan would be the way to go about it. The plan would
consist of timetables, tasks, and education efforts to move American companies
off U.S. GAAP and onto a single global standard. "I don't believe in a two-GAAP
system," he said.
The FASB chairman said he objects to providing U.S. issuers with an
"unfettered choice" between GAAP and IFRS because it undermines his goal of
getting to a single standard. The choice may appeal to some companies, he said,
but the standards are written for the benefit of investors, not companies.
Neither Herz nor Thomas Jones, vice chairman of the International Accounting
Standards Board, would give a date on which they thought convergence would be
completed. But speaking in New York at Financial Executives International's
annual conference on financial reporting and convergence, Herz said the
completion of FASB's current codification project, which is slated to be
finished by 2009, would be a major step in moving to a single global
standard.
One aim of FASB's codification project is to simplify GAAP and, therefore,
bring it closer in line with the more principles-based IFRS system. Currently
U.S. GAAP consists of 25,000 pages of standards and guidance, while IFRS has
about 2,500, remarked Herz. Jones agreed with Herz that companies need to move
to one set of standards, commenting that "principles are the issue."
Herz did note, however, that FASB has a significant amount of simplification
work to do, especially on pensions, leases, revenue recognition, and
financial-statement presentation.
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