Yesterday, the SEC gave the international accounting harmonization project a turbo charge when it proposed its Roadmap Toward Global Accounting Standards. The proposal does not guarantee that the US will switch to International Accounting Standard Board (IASB) rules. The SEC will have to make that determination in 2011 and the rules will not fully take effect until 2014. But it does move everything a big step closer.
The transition will have some impacts that may jar the system slightly. For example, as the Wall Street Journal points out, earnings will be affected:
Jack Ciesielski, an accountant and publisher of the Analyst's Accounting Observer, says accounting under IFRS tends to lead to higher earnings. He examined filings from 137 foreign companies whose shares traded in the U.S. in 2006. That was the final year that U.S. regulators required these companies to translate their books into GAAP from IFRS. Mr. Ciesielski says 63% of the companies reported higher earnings under the international standard, and the median increase was 11.1%.
As I noted earlier, much of the differences have to do with treatment of things like taxes, pensions and financial instruments. Intangibles do play a part - mainly due to IASB's rules for amortizing rather than immediately expensing R&D costs.
Accounting for intangibles may also eventually benefit from the shift -- as the IASB has seemed more willing to take on the issue of recognition of internally generated intangible assets and the harmonization process appears to have drawn resources away from that effort. As the switch to IASB moves along, there may be more resources available for the intangibles project.
At least we can hope so.
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