The Financial Times and a draft report from the UK arm of PwC recently called for efforts aimed at further international convergence of accounting standards to be abandoned. In the light of progress already made by the International Accounting Standards Board and the US Financial Accounting Standards Board, these calls are unfounded and should be firmly resisted.
This comment article, by Tommaso Padoa-Scioppa, was published in the Financial Times on 19 May 2006.
The most recent argument against further convergence claims that there is an inevitable trade-off between the needs of companies and investors and progress on convergence with US GAAP. This is a gratuitous statement, inconsistent with what the IASB has achieved so far.
First, convergence is not a zero-sum game where the gain of one standard-setter is a loss for the other. Second, convergence is not bound to lead to the predominance of traditionally rule-based US approaches over a principle-based system to which IASB is committed. The greatest obstacle to a principle-based approach is not the US standard-setting body but companies, auditors and regulators who seek comfort in narrowly defined rules.
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