Listen up! International standards take on new importance - Q&A

California CPA, June, 2003

* Q&A with IASB member Mary Barth

Two years ago, the International Accounting Standards Board was a mere benchwarmer in the standards-setting game. It was a group with a goal that in the eyes of many was little more than altruistic--to develop a single set of global accounting standards.

TIMES HAVE CHANGED

Last fall, the Financial Accounting Standards Board announced a convergence effort with the IASB and more recently that effort took on tangible meaning as FASB members unanimously agreed that stock options should be treated as an expense. The board's announcement followed the lead set by the IASB.

CalCPA member Mary Barth, an accounting professor and senior associate dean at the Stanford University School of Business, is a founding member of the IASB. Barth has been a member of the AICPA's Accounting Standards Executive Committee, as well as the Financial Accounting Standards Advisory Council and FASB's Financial Instruments Task Force.

This spring, Barth sat down with fellow CalCPA member Zaf Iqbal, an accounting professor at Cal Poly San Luis Obispo, to discuss the emerging importance of the IASB.

Q: Why, in 2001, did the International Accounting Standards Committee reorganize as the IASB?

A: People were realizing how important global standards were going to be and they wanted an international accounting standards board that was structured so that people could believe in the process and have confidence in the outcome.

Our No. 1 goal is to converge to the same set of standards, which means that there won't be any differences between international standards and U.S. standards or Canadian standards. Everybody wants to make this happen.

Q: How has FASB's attitude toward the IASB shifted?

A: A lot of things have happened. There was a belief that U.S. GAAP was superior. But a new board is in place and the FASB is committed to a partnership.

One thing that people have a misconception about is that there is a competition going on. They think that the FASB and the IASB are competing with each other to be the premier standard setter. That's not what's going on. We are partner standard-setters with the FASB.

The accounting scandals of last fall and the year before pointed out that although the United States has what I believe are the most comprehensive and best set of standards, they aren't perfect. And maybe all of the US. rules and guidance are not all a good thing.

The scandals resulted in some people saying, "We aren't perfect and maybe someone else might have a good idea now and again."

The market demand is out there. Global investors and so many people want this [international standards] to happen.

Q: Do you think a day might come when we won't need national standard-setting parties like the FASB?

A: This whole thing is going to evolve. We're seeing some of that now. The European Union, Australia and New Zealand will be going to international standards in 2005, but there still is a UK accounting standards board and an Australian accounting standards board, a French and a German.

In some sense, we need organizations in these countries to be the eyes and ears on the ground to help make sure we understand the transactions and what's going on in those countries. We're always going to need some local standard-setting body to help us. We can't just sit in London and know what's going on throughout the world.

I don't see them going away, but the role will change. I don't see the United States giving up its standard-setting body.

Q: Can you explain the convergence of standards?

A: We have to ask--whenever we do a joint project--who is going to lead? Is it the FASB or us? We've decided that if the IASB recently has looked at an issue and made a decision, then the FASB needs to look at its standard and see whether the more current thinking of the IASB is what they want to follow, and vice versa.

There are differences and we want to get rid of them. Sometimes it s just a matter of issues that haven't been looked at for a long time, but things have changed and changes need to be made. What's going on is that these two boards are trying really, really hard to agree.

Q: Do you think there will be a day when all countries will agree on one set of standards?

A: I have confidence that there will be a day when the differences among the standards will be so small that we won't notice. I don't think that it's a matter of all the countries adopting the same standards--a bunch of countries will. I don't know if the US. ever will, but the day will come when the differences are small. That's the day we're striving for.

Q: How can international standards balance any differences--cultural or regulatory--between countries?

A: The frameworks that standard-setting bodies have around the world are very similar. They aren't identical, but that's one of the things we're going to converge.

If you think about it, the definition of assets, liabilities, revenues and expenses are very broad and very general--and there are some subtleties. But for the most part, they aren't controversial.