Sweeping away GAAP

CA Nikita | Last updated: 02 October 2007

Save Share

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
October 01, 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.

Join CAclubindia WhatsApp Finance Community & stay updated with the latest TAX news, compliance alerts and important updates all in one place!