US backs international standards

Tue 2 Sep 2008

US backs international standards

Source: BBC News, www.news.bbc.co.uk, 28 Aug 2008

US companies could have to use international accounting standards by 2014, under a proposal put forward by the Securities and Exchange Commission.

The five SEC commissioners proposed a timetable for the switch from US standards, known as GAAP.

US companies could have the option of using international standards in 2010. The SEC would then decide in 2011 whether to make it mandatory from 2014.

Analysts welcomed the proposal as necessary to increase transparency.

An international set of accounting standards enables investors to see how much money companies are making, regardless of where they are based.

Most large publicly listed companies already conform to international standards. Supporters of the switch to international standards had argued that the need to conform to US accounting standards deterred some foreign companies from listing on US stock markets. Goldman Sachs, Morgan Stanley, Merrill Lynch and Microsoft all backed the move.

Accountants have long argued in favour of a single set of global accounting standards and the American Institute of Certified Public Accountants welcomed the SEC's move.

"We believe the capital markets ultimately will insist on IFRS (international standards) for public companies," said Barry Melancon, president and chief executive of the American Institute of Certified Accountants. The "action by the SEC continues a robust and thoughtful debate that is critical as the transition occurs," he added. But opponents of the move argue that the US standard is tougher than the international accounting rules, and that a change would make it easier for accounting scandals like those at Enron to emerge again in the future.

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