US official "optimistic" on global accounting move

Mon Feb 20, 2012 9:45am EST

* SEC to make global accounting proposal in coming months

* IASB's Hoogervorst welcomes latest SEC comments

By Huw Jones

LONDON, Feb 20 (Reuters) - A senior U.S. regulator was "optimistic" on Monday about finding a framework for the world's top economy to use global book keeping rules for investors to compare cross-border companies.

"We are hopeful we can put forward a model," James Kroeker, chief accountant at the U.S. Securities and Exchange Commission (SEC), told Reuters.

More than 100 countries, including Europe, use accounting rules from the International Accounting Standards Board (IASB) and are waiting to see if the world's biggest capital market, with up to 12,000 listed companies, adopts them too.

Other heavyweights like Japan would likely follow suit.

Kroeker said the SEC had delayed its decision due the more urgent and heavy work of fleshing out a reform of Wall Street known as Dodd-Frank.

Work on aligning U.S. and IASB accounting rules aimed at paving the way to U.S. adoption has also taken more time, along with a review of IASB governance.

Kroeker said he will make a proposal to SEC commissioners in "coming months" on how the United States could switch, which would spark changes in how the IASB deals with national bodies.

He downplayed the notion of smaller firms being able to opt out indefinitely if U.S. adoption went ahead.

"Having a model that works for everyone, even if there is a delay in timing, is important, otherwise you ingrain the idea that the smaller companies will never have to change and you end up with a two GAAP system permanently in the U.S.," he said.

Kroeker was in London to attend the IASB's advisory council where he gave an update on the U.S. adoption decision.

"I would not want to let a handful of areas that are particularly challenging hold up the broader important decision. There might be ways we need to finesse over time. There will be some areas we might not align on day one," he told the meeting.

MULTILATERAL MECHANISM

IASB Chairman Hans Hoogervorst, under pressure from IASB member countries to move on from years of heavy focus on convergence with U.S. rules, welcomed Kroeker's comments.

"It was a very solid and confidence-boosting statement. I think they are on the right track," IASB Chairman Hans Hoogervorst told Reuters.

To reassure the United States it would still have a strong voice after adoption, Hoogervorst spoke of the need for a new, multilateral mechanism to keep national standard setters like the U.S. Financial Accounting Standards Board (FASB) plugged into the IASB rulemaking process.

"If we only have informal bilateral relations... then the potential for chaos is massive," Hoogervorst told the meeting.

Kroeker said the U.S. would not expect preferential treatment after adoption but there was a need to maintain a strong American voice from the start in IASB rulemaking.

"Multilateral agreement would be important and involvement early on would be critical," Kroeker said.

A multilateral mechanism could also deal with remaining differences between national and IASB rules after adoption.

"It does leave open the possibility that there are some areas where we will have to continue over time to narrow the differences," Kroeker said.

FASB could decide not to apply an IASB rule that "does not improve financial reporting for U.S. investors," Kroeker added.

After Kroeker makes his proposal, SEC commissioners will likely hold a public consultation ahead of a vote, perhaps later this year. Any U.S. adoption would likely be over several years.

World leaders, including U.S. President Barack Obama, called in 2009 for a single set of global accounting rules to improve transparency for investors and regulators.

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