<http://www.nytimes.com/2001/01/26/business/26ACCO.html?pagewanted=all>
January 26, 2001
Fewer Borders for Global Accounting
By FLOYD NORRIS
A new International Accounting Standards Board was appointed yesterday, with a
mission of producing coordinated accounting standards within a few years.
"If we are going to have integrated international financial markets, information
must be reliable," said Paul A. Volcker, the former Federal Reserve chairman,
who headed the committee that appointed the 14 members of the new board. "I hope
this will lead to international accounting standards that are very widely
accepted."
The board will be led by Sir David Tweedie, who formerly directed the Accounting
Standards Board of Britain. At a joint news conference held in New York and
London, Sir David expressed hope that several major standards would be agreed
upon within three years and would be accepted by accounting regulators in
leading countries.
To the extent that identical accounting standards are accepted in major
countries, this would reduce the costs for multinational companies in complying
with varying rules, and make it easier for investors to compare companies in
different countries.
Sir David said he thought that the international board would choose to adopt
less detailed standards than those of the Financial Accounting Standards Board
in the United States.
"You have gone too far with your detailed rules," he said. "You are far better
to have a principle" that accountants can then apply.
Such an approach would put more responsibility on the Big Five international
accounting firms that audit most companies around the world, who would have to
determine not just whether accounting met specific rules but whether it complied
with a principle. Asked about that, Sir David replied, "If people start to play
games, we'll have to add rules."
Mr. Volcker said "the standards may be general but they will not be loose,"
adding, "I hope there will be more discipline among the accounting firms to
enforce the rules."
The world of international accounting has long been riven by conflicting rules
in different countries, with some regulators in the United States thinking that
American rules are the best and suspecting that international standards are a
way of letting companies avoid rigorous accounting standards. The Securities and
Exchange Commission turned away efforts to allow major foreign companies to sell
securities in the United States without adapting their accounting to American
standards.
But as pressure grew for international standards, the American position began to
change, with the hope growing that a strengthened international body could
promulgate strong standards that would gain widespread acceptance.
The national bodies will continue to adopt their own standards, but the new
board will have members whose main duty is to serve as liaisons to rule makers
in the United States, Britain, Canada, France, Australia, Germany and Japan.
Lynn Turner, the chief accountant of the S.E.C., expressed hope in an interview
that "we'll see a race" between the international board and the F.A.S.B. "to see
who can get to the highest-quality standards."
Sir David noted that in several contentious accounting issues, like merger
accounting and the accounting for stock options, people looking for liberal
accounting treatment had argued that strict standards would put a country's
companies at a disadvantage to foreign companies.
"The real test," Sir David said, "will be if the F.A.S.B. changes its standards
to the international consensus. I think they will."
Edmund L. Jenkins, the chairman of the F.A.S.B., said he anticipated "a close,
constructive and active relationship" with the international group.
Of the 14 members of the new board, 12 will be full-time members and 2 will be
part-timers who retain other jobs. Some foreign organizations had pushed for
part-timers, hoping that such people would be more in tune with the needs of
companies filing financial reports, while the Americans pushed for a full-time
board composed solely of accounting experts, not of people with constituencies
to represent.
The result is a compromise, but one that comes closer to the American view. The
vice chairman of the group will be Thomas E. Jones, a British citizen who was
formerly chief financial officer of Citicorp. The board will include two men
with long experience on the F.A.S.B., Anthony T. Cope, who will resign from the
American board, and James J. Leisenring, a former vice chairman of the F.A.S.B.,
who will serve as liaison to the American group.
The other liaison posts will go to Hans-Georg Bruns of Germany, an official of
DaimlerChrysler; Gilbert Gélard, a French partner of KPMG; Warren McGregor, a
former chief executive of the Australian Accounting Research Foundation;
Patricia O'Malley, who will step down as head of the Accounting Standards Board
of Canada; Geoffrey Whittington, an accounting professor at Cambridge
University; and Tatsumi Yamada, a partner at the Japanese affiliate of
PricewaterhouseCoopers.
The other full-time members of the board, who will be expected to move to the
London area, are Robert P. Garnett, a South African and an executive of the
minerals giant Anglo American, and Harry K. Schmid, a Swiss executive of Nestlé.
The two part-time members, who will keep their current affiliations, are Mary E.
Barth, a Stanford University professor and former partner of Arthur Andersen,
and Robert H. Herz, a partner at PricewaterhouseCoopers in New York.
