State of accounting convergence among large public companies

Accounting Convergence

The State of Accounting Convergence Among Large Public Companies

What are the reasons driving the state of accounting convergence in large public companies? It is believed that many companies are avoiding convergence because of cost considerations -- for example having to produce multiple sets of financial statements.

What are the motivations, weighted by importance, for large companies to reject the accounting standards convergence promoted by the IASB, FASB and SEC?

Overview/Description of the Problem

The IASB, FASB and SEC are promoting accounting convergence between national accounting standards and international accounting standards. This convergence is occurring in a number of countries, including the United States, European nations (Larson & Street, 2004) and China (Qu & Zhang, n.d.). The convergence process has met with resistance by corporations for a number of reasons. In order to better understand how convergence can be executed globally, the objections of publicly-traded corporations need to be better understood. At present, the current reasons for resistance to convergence on the part of large public companies are not well understood. This paper will investigate some of the objections in order to shed light on the nature of the resistance to accounting convergence.

Methodology

The first step to addressing the research question will be to conduct a survey of the literature on accounting convergence. The literature will include official explanations of what convergence is and why it is being implemented (AICPA, 2011 & 2010). This will be the basis for the survey component of the study. The survey component will be conducted with members of large public company accounting departments, using the Delphi methodology of structured forecasting. The Delphi method is preferred because the two-round interview system is believed to deliver better responses than individual unstructured interviews. The objective is to uncover systemic issues with accounting convergence, rather than firm-specific ones. It is believed that the second interview round in particular, where the participants are responding to the comments of their peers, will help to eliminate as much firm-specific thinking as possible in the responses.

Purpose/Perceived Value

The findings of this report will be valuable to two different audiences. The first consists of accounting regulatory bodies. These bodies are working towards convergence and are presently struggling with the resistance from the business community. Understanding the nature of that resistance is key to finding ways of overcoming it. For the large publicly traded corporations themselves, this report will help them understand why they and their peers are resistant, and this will shed light on whether or not that resistance is justified. Convergence is coming whether the corporate world is ready for it or not, but the key for corporations is to understand what convergence is, why it is important, and which elements of their resistance are not worth the effort. For both parties, it is important to work together to make the convergence process as smooth as possible, and that is going to take a greater degree of communication that has perhaps taken place thus far. This study will help to foster greater communication among the relevant stakeholders.