Kula Consulting Blog

Earlier this month I posted a blog about the globalization of accounting and reporting standards, and how those proposed changes could adversely impact American accountants’ careers.  I have a vested interest in this subject: as an owner of an accounting staffing firm, the future of the profession has an enormous impact on my business.

Since my post I checked in with several CFO’s on this subject and asked for their take on the changes.  I could best describe the CFO’s as being extremely wary. Why, they asked, was there such a rush to make major changes in the accounting profession?

It seems all the rule making and regulatory groups are getting into the act:

- The SEC last fall announced that foreign registrants can use international accounting and reporting standards when they file reports.

- The FASB has a major project underway (since 2001 apparently) to start reconciling international standards with US GAAP.   A fundamental issue will be reconciling the “rules based” and “principals based” approaches to determining accounting standards.

The FASB and the international accounting standards people are working on a joint-project to fundamentally change financial statements.  Will we see the end to Net Income as a line item on
the P&L?

Oh, also throw in the “plain language” initiative before congress and this matter becomes even more interesting.

So, who is pushing for these fundamental changes?

It doesn’t appear to be American CFO’s.  The polls I’ve seen state that CFO’s question the proposed speed and need for many of the initiatives being put forward by the SEC, FASB and the international financial standards people.

Ok, if the CFO’s aren’t asking for these changes, I sincerely doubt that board members or CEO’s are behind the changes. Rank and file shareholders are not likely advocates - they rarely read the financial statements that companies send them now.

The big international CPA firms will certainly benefit from all the changes.  Think of all those fees (whoops, forgot about the law firms) they will collect from training and advising clients.  I would put them close to the top of the list of groups benefiting from these changes.

The best guess for this momentum for change (no – not Obama!) is Wall Street and the SEC.  Stock exchanges are starting to merge and would benefit from uniform, global accounting and reporting standards.  Stock analysts would also benefit from global standards and, perhaps, from new financial statement presentations.  The SEC is pushing for registrants to file reports using the XBLR format with the goal of building a uniform, searchable financial database on the Web.   If all financial reports used the same accounting standards and reporting formats, this database would be a very powerful tool for investors and analysts.

Perhaps having a unified, global set of accounting and reporting standards is a good thing.  But, when accounting knowledge becomes a commodity skill set as have C++ programming skills, will the offshoring/outsourcing of senior-level accounting jobs be the unintended consequence of globalization?

How to Stay Informed on this Issue

In keeping with Kula’s ongoing effort to keep our colleagues up on the accounting field’s latest trends and issues, we’re developing a seminar during which time experts will provide an overview of the major changes taking place in international accounting – including a few that are still “in committee.”

After hearing from our panel composed of representatives from FASB, securities, public accounting and law, you will walk away with an accurate analysis of how these changes will impact you, and what will be required as you account for and report financial information in the near future.

I’ll be sending out invitations as soon as we solidify the exact date. In the meantime, I am including a few links to more detailed information about the initiatives.

From CFO magazine:  http://www.cfo.com/article.cfm/10597001/c_10598910 
To the SEC’s XBLR analysis tool:    http://www.cfo.com/article.cfm/10597001/c_10598910
From Financial Week:  http://www.FinancialWeek.com/apps/pbcs.dll/article?AID=2008492320813

From a blog by PWC:  http://pwc.blogs.com/ifrs/2008/02/improvements-in.html

Another SEC item:  http://www.sec.gov/about/offices/oca/acifr/acifr-ddm-011108.pdf

Please let me know your thoughts about the future of the accounting profession, especially those regarding the impact on the American accounting workforce.

Best,
Rich