You can almost feel the sense of … I don’t know – maybe triumphalism? satisfaction? feeling of a job well done? in the IASB (International Accounting Standards Board) these days. With over 100 countries now either requiring or allowing the use of the IFRS (International Financial Reporting Standards) that feeling is probably justified. The IFRSs are now the global de facto reporting standards.

That is not to say they are faultless – there are plenty of areas where they could be improved. In my specialist area of IAS 39 (Financial Instruments: Recognition and Measurement) I can think of a few – hedge accounting is a good example. IAS 17 (Leasing) is another area with some real absurdities. (Further examples may be added in comments if you want to let off a little steam).

To be honest, I think one of the reasons they have achieved the position they are in now is the Sarbanes-Oxley legislation in the US.

That probably requires some explanation. Historically, firms seeking to list offshore normally either went for the NYSE or Nasdaq. They were the deepest, most liquid pools of capital around. Firms seeking to list there had to adopt US GAAP and US corporate standards – no exceptions. Most non-US standards setters therefore use US GAAP as at least a reference point, and a good working knowledge of at least some US GAAP was considered the mark of a good accountant.

After the Enron / Worldcom debacles and the US response (Sarbanes / Oxley – SOx) two things happened. Firstly, the failure of the US standards to pass the test of even presenting true and fair accounts was transparent. Whether this is a fair assessment of this, by the way, is irrelevant – US GAAP had been seen to fail. US standards were no longer seen as any sort of “gold standard” to be aspired to.

Secondly,  and probably more importantly,  listing in the US became much less attractive. The costs of complying with SOx was (and is) so high that a US listing became a luxury to be enjoyed by those with more dollars than sense. Convergence with US GAAP therefore lost its primary purpose.

Listing in London, either on AIM or the LSE main board, became the norm. As it was known that the entire EU was going IFRS, these became the de facto standards. As they were also designed to be, and were, international in scope it became a simple job just to adopt them, rather than maintaining a differing set of accounting standards for each country.

There are still a few major countries with their own standards apart from the US (Japan and Canada for example) but even here the work seems to be to converge with IFRS, rather than US GAAP.

Maybe one day you will be able to pick up a set of accounts anywhere on the planet and actually be able to understand them.

OK, maybe not.