As chair of the London-based International Accounting Standards Board, Sir David Tweedie is championing an effort to develop a single set of global financial reporting standards that will be both understandable and enforceable. More than 100 countries now require or permit the use of International Financial Reporting Standards developed by the IASB. Before taking on the convergence mission, Tweedie served as the first full-time chair of Britain's Accounting Standards Board. He was knighted in 1994 for his service to the profession and his efforts to reform British accounting standards in the wake of financial scandals. Tweedie spoke recently with Journal of Accountancy Publishing Director Geoffrey Pickard about convergence issues and the future of accounting.
JofA: What do you think the IASB's biggest challenges will be over the next three to five years?
Tweedie: Right now, just over a hundred countries require or allow companies to use the IASB'S International Financial Reporting Standards (IFRS). In five years that figure will probably have risen to 150 countries.
We have a major convergence program with the Financial Accounting Standards Board based on the idea that if the U.S. has a better answer, we should have it--and vice versa.
Our two boards made an agreement with the SEC that, rather than making sure that every single detail in our respective standards was aligned, we'd divide the standards into two sets: one for which we should just pull the principles into line because the standards were basically OK, and the other set where we both had outdated standards, which we would replace by writing new ones together.
So by 2011-12, U.S. and international accounting should be pretty much the same--with 150 countries using IFRS and several others using U.S. GAAP. That adds up to about 170 countries accounting in much the same way. So, by then, if you're a company in one of the remaining 50-odd countries, you're going to have a problem attracting finance. The idea of one single set of standards for use around the world is gathering momentum. And that's why it's important, I think, for the U.S. profession to look at what's happening internationally, because it's coming your way, just as the rest of us are watching the U.S. because we're moving together.
JofA: Is comparability surfacing as an issue as countries adopt International Financial Reporting Standards with a national flavor?
Tweedie: It is. At the IASB we are increasingly concerned about doing what we call "protecting the brand." You can see the importance of this in looking at Australia's experience. When they switched to IFRS, the Australians called them Australian International Financial Reporting Standards. They are actually IFRS, but nobody thinks they are because they've got Australian …