Pressed last March to describe the biggest controversy between US and international accounting standards setters, Robert Herz replied, “I like one brand of Scotch, and Tweedie likes another.”
Herz, the often droll chairman of FASB, was referring to Sir David Tweedie, the soft-spoken Scot who is his counterpart on the IASB. But there is more than a dram of truth to Herz’s answer.
Although many differences remain between US GAAP and IFRS, they are being eliminated faster than anyone, even Herz or Tweedie, could have imagined. In April, FASB and the IASB agreed that all major projects in future would be conducted jointly. That same month, the SEC said that it might allow foreign companies to use IFRS to raise capital in America from 2007 onwards, eliminating the current requirement that they reconcile their statements to US GAAP.
The change is all the more remarkable given that the IASB was formed only four years ago, and has rushed to complete 25 new or revamped standards in time for all 25 countries in the EU to adopt IFRS by this year. By next year, some 100 countries will be using IFRS. “We reckon it will be 150 in five years,” marvels Tweedie. “That leaves only 50 out.”
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