Déjà Vu All Over Again
After the global financial crisis, the leaders of the G-20 countries called for global regulatory cooperation and collaboration, including the adoption of global accounting standards. As the then global chairman and CEO of EY, I was a strong supporter of that approach. I still am, even though momentum toward global regulatory convergence has slowed considerably as the crisis has receded and economies are regaining their footing.
IFAC itself recently issued a statement calling for the G-20 to renew its focus on regulatory convergence, stressing that although high-quality global standards for financial reporting, auditing, and ethics exist, too many countries appear to be reverting to national policy-making agendas. Putting global convergence on the back burner practically guarantees that the global community won’t be ready when the next crisis hits.
Take International Financial Reporting Standards (IFRS) as an example. Back in 2009, the G-20 leaders specifically urged the International Accounting Standards Board (IASB) and US Financial Accounting Standards Board (FASB) to work together to adopt a “single set of high-quality global accounting standards.” The Financial Stability Board also signaled its concern about the direction and speed of convergence, particularly in the area of financial instrument accounting. However, despite the G-20 pressure, IASB and FASB have struggled to find common ground and, in late December 2013, FASB announced its decision to move forward and continue refining its own proposed impairment model.
Some issues will always be national, and there’s nothing wrong with that. But when national interests trump the spirit of cross-border cooperation, it’s bad for businesses that operate globally as well as for capital markets.
That seems to be what we’re seeing in the European Union (EU) right now. After more than two years of legislative wrangling, the EU seems poised to adopt audit reform legislation that would impose mandatory audit firm rotation and severe restrictions on non-audit services—but would give Member States latitude to decide on the length of rotation periods and tweak the definition of non-permissible services. This would be a costly, complex, and, frankly, terrible outcome for European and global businesses and investors.
Under Australia’s leadership for 2014, the G-20 seems to be tackling the right themes: promoting stronger economic growth and employment outcomes and making the global economy more resilient to deal with future shocks. Having common global standards and practices that provide capital markets with certainty are fundamental to developing that kind of growth and resilience.
In a speech to the Commonwealth Club of San Francisco five years ago, I said, “The G-20 could encourage all countries to move more quickly to embrace and implement best practices consistent with the international corporate governance principles, as well as adopt other internationally agreed-on standards, such as IFRS, and hold each other accountable for timely action.”
Sadly, I can say exactly the same thing today. I urge the G-20 to use this year’s deliberations to renew their commitment to global cooperation and consistency in financial regulation, look inward to identify any places where their national agendas are blocking global progress, and make changes before Australia hands the presidency over to Turkey in 2015.
Help IFAC improve the Global Knowledge Gateway.
Click to recommend this article.
December 24, 2014 - American Institute of CPAs
December 17, 2014 - IFRS Foundation
December 15, 2014 - Association of Chartered Certified Accountants
December 15, 2014 - CPA Canada
December 15, 2014 - American Institute of CPAs
December 15, 2014 - AICPA Insights
Latest Accountancy News
December 19, 2014 - The Strait Times
December 19, 2014 - The Accountant
December 19, 2014 - Business Day
December 19, 2014 - The Accountant
December 19, 2014 - MoneyWeb
December 18, 2014 - Balkans.com
December 18, 2014 - The Accountant
December 17, 2014 - Australian News 7
December 17, 2014 - Business Standard
December 17, 2014 - Financial Director
December 17, 2014 - Osun Defender
December 17, 2014 - Relocate magazine
Suggest a Resource, News Item, Event, or Discussion Topic