Michel Barnier, the Frenchman who is the European Commissioner for internal market and services, spoke in New York on Friday at a luncheon sponsored by the Atlantic Council and the Clearing House, and made the plea for the United States to adopt International Financial Reporting Standards, something that now seems very unlikely.
FLOYD NORRIS
Notions on high and low finance.
“I continue to be disappointed by the slowness of the U.S. in moving toward internationally agreed accounting standards,” he said. “It is essential to have common basic standards. Otherwise we risk that our prudential standards will have different effects.”
He warned of the risks from a return “to a fragmented system based on national or regional approaches.”
Whatever the United States does, genuinely “common basic standards” are probably never going to arrive. And France can take a lot of the credit, or blame, for that.
It was France, at the behest of its banks, that nearly a decade ago insisted on a carve-out from the rules on bank accounting when the European Union agreed to adopt international standards. As a result, Europe’s banks had a choice of which rules to follow.
That move did not go over well with a lot of people. When the United States Securities and Exchange Commission decided to allow foreign companies to file financial reports using the international standards without reconciling them to American rules, it specified that exemption was being granted only to companies that followed the rules without the carve-out. The rules are written by the London-based International Accounting Standards Board.
After the address, I asked Mr. Barnier if the European commitment to common rules meant that it was now willing to give up carve-outs from rules it did not like. Before he could reply, one of his aides, Nadia Calviño, leaped in to point out it was a very small carve-out that Europe demanded and got. (It was small in terms of words, but not in terms of effect.) She made clear Europe was by no means giving up the right to opt out of rules it did not like. Later she told me that the accounting standards board was working on new banking rules, which might not require a carve-out, and that I should look to the future, rather than the past.
Mr. Barnier is the same commissioner who in the past has seemed to threaten to withhold funds from the accounting standards board if it adopted rules that Europe did not like. And he has warned that Americans on the international board might have to go if the United States did not join up.
American support for international reporting standards seems to have faded away. Some big multinationals still like the idea, and so do the big accounting firms. But to many businesses the idea of changing seems like a significant expense with little benefit. The United States Financial Accounting Standards Board and the international board have been seeking a convergence of standards, but it is clear that neither is willing to defer to the other when they have sharp disagreements. It appears that Generally Accepted Accounting Principles will continue to be applied to American companies.
Mary Jo White, President Obama’s choice as the next head of the S.E.C., has not, to my knowledge, taken a position on this. But unless she chooses to make adopting international reporting standards a major priority — and appointed a chief accountant who agreed — it is unlikely that much will change.
If Europe really wants to persuade Americans to back international standards, it might help if it swore off future political alteration of accounting rules that it does not like.
Article source: http://economix.blogs.nytimes.com/2013/02/15/sauce-for-the-goose-french-style/?partner=rss&emc=rss