US and Europe Conclude Agreement to Unify Accounting Standards
A recent international economic summit was concluded a few days ago with an agreement on a transatlantic partnership. The USA and the EU made arrangements to harmonize their legislation in areas of intellectual property, safety of food products, and regulating pharmaceuticals. They also agreed to continue joint efforts toward reaching a mutual acceptance of each other's accounting and financial standards by 2009.
A few days earlier, the SEC announced that, starting in 2009, it will not require European companies placing shares in American markets to present accounts prepared in accordance with US GAAP. This act will complete the process of the convergence of US GAAP and International Accounting Standards (IAS) which was started in 2002 as an agreement between the IAS Board and the U.S. Financial Accounting Standards Board.
The SEC does not intend to stop at that. It announced that American companies will also be given opportunity to keep records according to the IAS. Further explanations regarding the scheduled reforms will be presented by the SEC by the end of the year.
Western experts expressed confidence that the right for American companies to freely choose between the IAS and US GAAP will be a beginning of the end for the American accounting system. IAS, based on principals rather than detailed rules, allow companies a greater freedom of operation. Many international companies use IAS for their branches abroad and will be very interested to unify the accounting standards.
Many experts are certain that the USA is adopting such steps because of concerns for the increasing rate of IPO taking place abroad. Therefore the US is striving to harmonize their regulation rules to the European standards as much as possible.
The unification of standards will also be profitable for Russian companies placing shares in the USA. As of today, the number of US GAAP experts in Russia is much lower than of IAS specialists, and they are paid more. Large companies often require several such experts. Therefore, such unification of financial standards will be very profitable for Russian businesses.
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