If the Securities and Exchange Commission on Thursday votes as expected and allows non-U.S. issuers here to report their financials in line with International Financial Reporting Standards without reconciling them with Generally Accepted Accounting Principles, the United States will have crossed a point of no return in the movement toward a single set of global accounting standards, some experts feel.

But that doesn’t mean that many key players won’t cross that line without a fair amount of kicking and screaming.

Speaking at a roundtable discussion on global accounting standards at New York University’s Stern School of Business on Monday, Charles Niemeier, a member and former acting chair of the Public Company Accounting Oversight Board, said that he was “a bit troubled by the speed” of the SEC’s march toward the convergence of U.S. and international accounting standards. “If we eliminate reconciliation, what have we done? I have some fear that we’re crossing the Rubicon — that we’ve lost leverage in order to get closer [to global uniformity].”

Leverage by U.S. regulators and standard-setters to push for rigor in converged standards could be lost, as well as the clout to hold individual companies to international rules, Niemeier told CFO.com. At the roundtable, the audit firm overseer disputed a basic premise of the proponents of convergence: that if the international standards are adopted in the United States, it would produce a clearer system based on solid principles rather than rule-based minutiae. “Some say Europe is principles-based. I beg to differ. It’s younger,” he said, suggesting that much of the detail in GAAP is justified by long-standing experience. Some speakers said that IFRS lacks the detail provided under GAAP to provide adequate financial reporting in a number of specific industries in the United States, particularly oil and gas and insurance.

By contrast, critics of U.S. GAAP’s complexity, including the SEC’s own advisory committee, consider industry specific guidance to be one of the U.S. accounting system’s major flaws.

At the same time, many roundtable participants worried that the U.S. legal system — also blamed for the complexity of U.S. GAAP — might trip up global accounting standards too. Under the U.S. legal system, they said, auditors feel they must adhere closely to preset rules in order to avoid being sued. In order for IFRS to take hold in the United States, there needs to be “a change in the way we look at litigation in America, where it’s a mark of honor to sue someone,” said Stern accounting professor Seymour Jones at the roundtable.

Even a decision by the SEC to recognize the International Accounting Standards Board (which sets IFRS) as a bona fide standards setter could get tested in a U.S. court, according to Stanley Siegel, an NYU law professor. “Nothing is going to stop an American litigant who has bought shares in an American company or a Brazilian company” issuing stock in the United States from questioning the validity of the SEC’s choice of IASB under Section 108 of the Sarbanes-Oxley Act, he said. (Sarbox 108 enables the SEC to designate a standard setting body’s accounting principles as “generally accepted.”).

Indeed, many seem to feel that the SEC is moving ahead too swiftly and without adequate planning for what truly looms as a major step in the direction of converged international accounting standards. Even Financial Accounting Standards Board chairman Robert Herz, perhaps convergence’s prime U.S. spear carrier feels that “a national plan” for convergence needs to be in place before target dates are set. “Before you get to a timetable,” the key players need to determine “what are the tasks to be done.” High on the plan’s priority list should be educational and regulatory requirements. Underscoring the point about education, Nieimeier said in an interview that few people at PCAOB understand IFRS.

Nevertheless, convergence seems to be proceeding apace. While the SEC has been promoting the idea of installing a single set of international standards for about 20 years, the notion has gone into high gear in the last year, according to John White, the director of corporation finance at the SEC.

The reconciliation proposal, which White and SEC Chief Accountant Conrad Hewitt will present to the commission on Thursday, would create the unprecedented existence of “two co-existing financial reporting systems in the U.S.,” White said at a Financial Executives International conference in New York earlier this week. In developing the proposal, he said, the commission had three questions to answer:

• Is there a satisfactory convergence process in place?

• Are International Financial Reporting Standards being consistently and faithfully applied?

• Is IASB up to the job of setting global financial accounting strictures?

The commission is apparently satisfied enough with the answers to go ahead with at least the first step. The percentage of public issuers in the United States that will be affected is modest, however. Just 1,100 companies out of the 11,000 entities that report their financials to the SEC are foreign issuers, and only 200 of them use GAAP. Of the remaining 900 foreign companies required to file a GAAP reconcilation report, up to 180 may qualify to take advantage of the proposal if they file their financial reports using the IASB’s version of IFRS.

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