Accounting Standards in the next five years - Essay Example

"Will there be one set of accounting standards in use throughout the world in the next five years?" Over the last several years, there have been a growing number of calls for a single accounting standard to be put in place worldwide. As a result, the first step towards a universal system took place with the introduction of International Financial Reporting Standards (IFRS). A new standard was created, IRFS 13, and was implemented in over 100 countries. The positive to this standard is that it gives companies an exact definition of fair value.

However, this will affect GAAP users, as this standard simplifies the existing fair value measurement rule under Topic 820. Financial boards have concurred that fair value must be calculated using the price in the principal market for a certain asset or liability. If there is no principal market, then the most appropriate market for the particular asset or liability will do. David Larsen, managing director at financial advisory firm Duff & Phelps, works with companies on determining hard-to-value assets.

He comments, “It became clear through the crisis that users of financial statements were best served if they have a common definition for fair value” (Chasan, 2011). The new IFRS 13 standard will come into effect on January 1, 2013, but companies are permitted to use the standard from whenever they choose. However, there is strong opposition to the introduction of one set of global accounting standards. Many Americans have concerns with these new rules, and think that they will make GAAP obsolete.

Experts at the Securities and Exchange Commission feel that it is only a matter of time before a single set of standards is brought in. Jeffrey Keefer, CFO of chemical giant DuPoint, observes, “If I’m reading the tea leaves right, it’s not a question of if but when” (Johnson, 2008). One of the downsides to having a variety of accounting systems is that it is not cost efficient to maintain two sets of books using different standards. Everyone should get used to the idea of a single set of accounting standards because it will happen whether we like it or not.

References Chasan, E. (2011). Accounting boards agree on fair value definition. Wall Street Journal. Retrieved from http://blogs.wsj.com/cfo/2011/05/12/accounting-boards-agree- on-fair-value-definition/?KEYWORDS=accounting+standards Johnson, S. (2008). Goodbye GAAP: It’s time to start preparing for the arrival of international accounting standards. CFO Magazine, April 2008 issue. Retrieved from http://www.cfo.com/article.cfm/10919122?f=cfoecon_man