Last week’s BVWire reported that FASB Chairman Russell Golden says that the U.S. is “unlikely” to adopt International Financial Reporting Standards (IFRSs). Golden pointed out that the differences between jurisdictions mean that there will be at least some variation in the way that accounting standards are written, applied in practice, and enforced. However, the FASB will continue to work toward the objective of producing more comparable standards that are truly global.
Chris Thorne (Valuology), former chairman of the International Valuation Standards Board, who also had a stint as its technical director, asks this question: Does this apparent setback in attempts to create a single set of accounting standards have implications for the stated objective of the IVSC to produce a single set of global standards for valuation? “I believe it has lessons that are relevant,” he says.
Focus on outcome: In an article, Thorne says a parallel can be drawn between the FASB/IFRS discussions and those that have taken place over a number of years between the IVSC and various national valuation standard setters. “Much time can be, and has been, wasted on debates about whether a particular word or phrase in one standard is preferable to the equivalent in another. However, it is a fact of life that in different jurisdictions and cultures words that are superficially similar may be interpreted in very different ways. The important thing to focus on at a global level is the outcome of applying different standards. Different standards can produce the same result using different words arranged in different ways. If a principle is globally accepted then it is desirable that national standard setters are free to choose the way of complying with that principle that is most effective within their jurisdiction. The alternative of trying to achieve global consistency by enforcing complete uniformity of language runs the risk of misinterpretation and misapplication in practice because of legal and cultural differences.”
He goes on to say that the FASB’s announcement does not diminish the importance of global standards. “However, it does highlight the need for efforts to be focused on agreeing the fundamentals that are truly global and recognize that below this different paths may be taken to achieve those fundamentals,” he says.
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