Why Not allow FASB and IASB Standards to Compete in the US.

FASB


IASB


Setup in year 1973 for providing accounting standards for the American co.s FASB's experience and world leadership in making accounting rules.

Setup in year 2001 for providing accounting standards for the Help meet the needs of globalized businesses.

The inability of most users of financial reports to understand the complex technical issues underlying accounting standards. The costs of experimentation in standard-setting, economies from network externalities. The increased risk of a "race to the bottom" under regulatory competition. Law of Instrument. Help protect standard-setters from undue pressure from interest groups. Protect corporations against capture of regulatory body for their narrow interests. This may help build stringent standards for reputation building.

What do you think of the Increased risk of race to the bottom?

 A race to the bottom is a degradation of the quality and/or quantity of standards resulting from competition between standard-setting bodies.  Bad money drives out good money -Greshams Law

Network externalities
The benefits of having multiple customers adhere to the same standard. Without such externalities, each firm could follow its own rules and there will be little need for standards Expect the incremental network externalities associated with more users to become small at some point. We should not overstate the magnitude of network externalities

CHOICES TO INDIAN COMPANIES

US GAAP
Accounting changes are defined as a change in An accounting principle An accounting estimate A reporting enterprise The correction of an error in a previously issued financial statement is not deemed to be an accounting change (MERYLL LYNCH)

INDIAN GAAP
Changes in accounting policies are permitted only if the adoption of a different accounting policy is required by the statute or for compliance with an accounting standard or if it is considered that the changes would result in a more appropriate presentation of the financial statement of the enterprise. (INFOSYS,WIPRO)

IASB /IFRS
A change in the accounting policy is treated retrospectively by restating all prior periods presented and adjusting opening retained earnings

It would be wise to choose IFRS accounting standards.

Why IFRS ?
It has been recognized as a global standard in many countries like Australia, Germany, France and the U.K. The U.S SEC is working closely with IASB for convergence of the accounting standards. The U.S is relooking at the Sarbanes-Oxley Act of 2002 to permit the regulator to accept non-U.S accounting standards.

V. Balakrishnan, CFO, Infosys Technologies. -Global company has to adhere to Multicountry GAAP. -IFRS has gained a significant momentum across the globe.

ANY QUESTIONS ??

Submitted by Group 1