Corporate resistance to international accounting standards convergence

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?

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.

Works Cited:

Qu, X. & Zhang, G. (no date). Measuring the convergence of national accounting standards with International Financial Reporting Standards: The application of fuzzy clustering analysis. Xiamen University. In possession of the author.

Larson, R. & Street, D. (2004). Convergence with IFRS in an expanding Europe: Progress and obstacles identified by large accounting firms' survey. Journal of International Accounting, Auditing and Taxation. Vol. 13 (2004) 89-119.

AICPA. (2011). International Financial Reporting Standards (IFRS): An AICPA backgrounder. American Institute of CPAs. In possession of the author

AICPA (2010). Financial system considerations in IFRS conversion projects. American Institute of CPAs. In possession of the author.