Move to unify financial reporting standards


  • Business
  • Wednesday, 12 Feb 2003

BY K.P. LEE

GLOBAL investors may soon be able to compare financial information across national boundaries as more countries, including Malaysia, converge towards one common standard in corporate financial reporting, but greater international collaboration is required to achieve this quickly, says an authoritative report that will be released worldwide today. 

According to the GAAP Convergence 2002 report, an advance copy of which was made exclusively available to StarBiz yesterday, over 90% of a total of 59 countries surveyed are in the process of converging their national standards of financial reporting with International Financial Reporting Standards (IFRS). 

The report showed a marked leap forward in a worldwide movement towards this trend, with 58% of the countries intent on replacing their national accounting standards with IFRS for all listed companies. An additional 22% of the countries said they were adopting on a standard-by-standard basis, while 20% said they were eliminating differences between national standards and IFRS as and when practical. 

David Tan

“The vision of achieving a single worldwide language for financial reporting is beginning to materialise,” the report said. However, it warned that there was still much work to be done. 

“Despite greater moves toward convergence, our survey indicates that obstacles still remain to achieving full and consistent adoption of the standards in the near future,” it said. 

Based on research carried out by the world’s six largest accounting firms to gauge the extent and maturity of IFRS preparations around the globe, the report found that Malaysia was among the countries that had formal plans in place to achieve convergence with IFRS, especially for listed companies. 

“This will be very significant,” said David Siew, the managing partner of accounting firm BDO, one of the companies involved in the writing of the report.  

“With the convergence in standards, it would be much easier to attract investors to Malaysia's capital markets when there are no comparability issues. 

“The capital markets of countries which do not comply will be adversely affected,” he said. 

The report said while an overwhelming majority of countries had formally indicated their intention to converge, there were still disagreements in some countries with the requirements of certain IFRS, such as financial instruments and standards on fair value accounting. 

David Siew

The Malaysian accounting standards or MASB followed closely international accounting and financial reporting standards developments and in some cases, the MASB were more stringent than international standards, Siew said. 

He added, however, that Malaysia had not fully adopted all the standards issued by the International Accounting Standards Board as “some requirements may not fit the local scenario”. 

Siew said Malaysian standard setters should take a proactive stance in the international standards setting body so that a Malaysian input would be made during the early developmental stages of a standard. “In that way, we would not be faced with a de facto standard in which we had not participated but still be required to comply with,” he said. 

The report said the propagation of standards convergence should involve many parties and extend beyond the international standard setting bodies and accounting profession. 

“Analysts and investors should continue their efforts to promote convergence and participate in the standard setting process,” it said. “To achieve global standards, we must have global solutions.” 

BDO partner and head of its audit division David Tan said that all capital market participants should be involved in a process which would have global implications. “We urge the government regulators, MASB, as well as companies, their investors and the academic world to continue to work with the IASB and the accounting profession to eliminate differences between national and international standards. 

“Only with a joint effort will we achieve a common framework that is interpreted and applied consistently,” he said. 

The GAAP Convergence 2002 represents the third in a series of surveys conducted by the largest six worldwide accounting firms comprising PricewaterhouseCoopers, Ernst & Young, KPMG, Deloitte Touche Tohmatsu, BDO International, and Grant Thornton. 

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