How many accounting standards are enforced
Accounting standards: numbers, data, facts and theories
The United States is about to ratify the new world order in accounting. By 2014, the United States intends to abandon GAAP, which is used only in the United States, and switch to IFRS, a standard that has become widely accepted. Reduced to the essentials, the three most important changes can be summarized as: from 25,000 to 2,000, from many to one and from one to one of many.
The first change relates to pages. The IFRS fill 2,000. Judging by the epic breadth of the US rulebook, this is haiku. The short version reflects the reliance of IFRS on general principles rather than detailed rules. If the US joins global practice, its accountants will have to give up special rules and safe niches - carefully crafted conditions under which special accounting procedures and accounting rules were applied - and think more about economic substance.
The path taken by many to a globally applicable accounting process is a globalization success of the best kind. The IFRS emerged from intensive international negotiations. They are not the result of economic hegemony, nor were they introduced against the will of local bean counters. American accounting officials played a prominent role in their creation.
Americans used to be number one when it came to processing numbers, just as they did in finance theory, technology standards, and pop culture. At IFRS, the US is just one country among many and does not represent the top management. The EU needs to oversee an even larger economic area, and the hyper-detailed and legally-oriented US standards are not particularly popular.
The US may not prevail, but a globally valid accounting standard favors global capitalism in the same way that uniform flight rules favor international air travel. For multinational corporations, life is becoming easier, cross-border investments are becoming more calculable and an international standardization commission is better equipped to cope with the pressure of individual sectors, even if the regulations are only developing at a snail's pace.
Of course, the IFRS are far from perfect either. Most importantly, it relies too heavily on the wisdom of volatile financial markets. But after the failure of the world trade talks and amid the tensions that are resurrecting in Russia, it is reassuring that progress is being made on at least one international front.
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