international standards

There is an interesting article on FT.com which examines the effect of public companies in England adopting international standards and what that means for private companies. Currently, UK standards do not harmonize with international standards so there is a situation in which two competitors,one public, one private, may be accounting for similar transactions in a different manner. The UK standard setters goal is to harmonize with international standards over time but what happens in the mean time? In addition, the article states that there are three issues that are casting doubt about harmonization:

There was widespread agreement with this and, in 2004, the first of these "convergence" standards appeared. But three developments have since clouded the consensus.

One was the agreement by the International Accounting Standards Board to start a separate "small and medium-sized enterprises project", aimed at developing a separate set of standards suitable for private companies.

The second factor was the ASB's proposal to extend the application of its financial instruments standard FRS26 (the effective equivalent of the infamous IAS39) to all entities using full UK standards. It seemed strange to make UK private companies apply a version of IAS39 when even large listed companies were complaining about its onerous requirements. This convinced many that convergence of this sort might not be what was needed.

Finally, reinforcing this unease was the IASB's own proposals to converge with US GAAP. This seemed to be importing lengthy and elaborate rules, based on some new and unfamiliar concepts.

These factors will also come into play when (and if) the US adopts international standards.