Converging on the language of financial reporting.

• Author: Ostling, Danita K.
• Position: Global Views - International Accounting Standards Board

The financial events of the last year have certainly made it clearer than ever that a common worldwide language of financial reporting doesn't simply belong on a wish-list. It is a necessity. The good news is that the majority of countries surveyed recently support this need.

According to the latest findings of "GAAP Convergence 2002," the third in a series of surveys by major accounting firms aimed at encouraging convergence of national accounting standards with those issued by the International Accounting Standards Board (IASB), the world is moving closer to that standard. (The complete survey is available at www.ifad.net.)

Majority report.

Of the 59 nations that participated, 90 percent acknowledged plans to adopt International Financial Reporting Standards (IFRS) issued by the IASB or to converge their national accounting standards with them. In fact, the survey shows that a majority of the countries surveyed not only intend to converge with IFRS, but have formally stated this intent.

This is, indeed, a major step forward for all in the business, government and investment worlds who have a vested interest in making reporting as clear as possible. No one can deny that comparability of investment targets is critically important, and in today's environment, it must be on a global rather than a domestic scale. A common set of high-quality accounting standards would facilitate cross-border comparisons, and, equally important, would reduce costs and much of the complexity for international companies.

Further evidence.

If further evidence is required that progress towards this end has been made in the past years, a look at the surveys carried out in 2000 and 2001 should provide that confirmation. Those surveys were "status reports" of the extent to which national accounting standards in various countries differed from international standards.

While the 2001 survey-showed some progress was made, it also revealed that many national standards continued to have a number of major differences from IFRS. In that report, the major accounting firms encouraged standard-setters and regulators to work harder to identify differences from international standards and to remove those differences.

Challenges ahead.

The 2002 survey was then designed to learn more about the plans -- or lack of plans -- in countries to promote and achieve convergence with IFRS. As already explained, the findings are gratifying, since they find a greater willingness than ever...