Common global reporting rules set

BRUSSELS – Two major organisations that set accounting rules published a detailed roadmap yesterday toward fashioning a common set of global reporting rules that would make it easier and cheaper for companies and investors to operate.

The International Accounting Standards Board, which compiles International Financial Reporting Standards (IFRS), and its US counterpart the Financial Accounting Standards Board signed a memorandum of understanding that set targets for scrapping reconciliation by 2008 as well as reaffirming a commitment to common standards in the longer term. Under reconciliation, EU firms with US listings have to file a set of results for US regulators that conform to American reporting rules.Common global accountancy rules would allow multinational corporations with multiple listings to slash reporting costs by filing the same set of results in different countries.It would also make it easier for investors to compare the figures of companies from different countries.The United States has already agreed to accept from 2009 financial reports based on IFRS rules that would end the need for reconciliation for EU companies.The two boards yesterday set out a series of tasks for themselves by 2008 to achieve enough convergence between the two sets of rules to be able to scrap reconciliation.The United States is under strong pressure from EU Internal Market Commissioner Charlie McCreevy to end reconciliation quickly, but US regulators say the EU must first demonstrate that it can apply and enforce IFRS standards consistently across the 25-nation bloc.The EU only made IFRS standards compulsory for the 8 000 firms listed on the bloc’s stock markets from January 2005, and the first set of annual results based on these rules are only now being compiled.In the memorandum, the FASB agreed to examine how companies should report issues such as fair value option for evaluating some assets on a balance sheet; impairments; income tax; investment properties; research and development.The IASB will study borrowing costs, government grants, joint ventures and segment reporting.The two jointly will study some of the topics such as fair value and investment properties, with consultation beginning this year.The memorandum also details anticipated progress on a range of other topics including issuing a converged standard on reporting business combinations by 2007.In the meantime, the US Securities and Exchange Commission will analyse how IFRS is being applied in the EU and elsewhere for 2005 company reports.The memorandum also seeks to soothe concerns from McCreevy that the IASB will call for major changes to standards that have just been introduced and are yet to bed down.The boards agreed, however, that trying to eliminate differences between standards that are both in need of significant improvement is not the best use of resources.Instead, new common standards should be developed over the long term, the memorandum said.-Nampa-ReutersUnder reconciliation, EU firms with US listings have to file a set of results for US regulators that conform to American reporting rules.Common global accountancy rules would allow multinational corporations with multiple listings to slash reporting costs by filing the same set of results in different countries.It would also make it easier for investors to compare the figures of companies from different countries.The United States has already agreed to accept from 2009 financial reports based on IFRS rules that would end the need for reconciliation for EU companies.The two boards yesterday set out a series of tasks for themselves by 2008 to achieve enough convergence between the two sets of rules to be able to scrap reconciliation.The United States is under strong pressure from EU Internal Market Commissioner Charlie McCreevy to end reconciliation quickly, but US regulators say the EU must first demonstrate that it can apply and enforce IFRS standards consistently across the 25-nation bloc.The EU only made IFRS standards compulsory for the 8 000 firms listed on the bloc’s stock markets from January 2005, and the first set of annual results based on these rules are only now being compiled.In the memorandum, the FASB agreed to examine how companies should report issues such as fair value option for evaluating some assets on a balance sheet; impairments; income tax; investment properties; research and development.The IASB will study borrowing costs, government grants, joint ventures and segment reporting.The two jointly will study some of the topics such as fair value and investment properties, with consultation beginning this year.The memorandum also details anticipated progress on a range of other topics including issuing a converged standard on reporting business combinations by 2007.In the meantime, the US Securities and Exchange Commission will analyse how IFRS is being applied in the EU and elsewhere for 2005 company reports.The memorandum also seeks to soothe concerns from McCreevy that the IASB will call for major changes to standards that have just been introduced and are yet to bed down.The boards agreed, however, that trying to eliminate differences between standards that are both in need of significant improvement is not the best use of resources.Instead, new common standards should be developed over the long term, the memorandum said.-Nampa-Reuters