Viewpoint: Global Accounting Standards Should Not Be Converged.

The global convergence of accounting standards has been widely accepted by the business community.

Proponents claim that written guidelines can improve the quality of financial statements, and that convergence of accounting standards will help reduce capital costs and facilitate cross-border pactions.

They also claimed that the adoption of international financial reporting standards (IFRS) by listed companies within the European Union (EU) is not only a key step towards a single European capital market, but also important for the Securities and Exchange Commission to accept the IFRS accounts submitted by overseas registration companies: these companies do not need to check the accounts in accordance with the United States generally accepted accounting standards (GAAP).

When companies that are preparing to use and are already using the EU approved financial statements are battered by changes in IFRS in 2005, people began to question the role of the fair value accounting model (the original text), the international accounting standards board (IASB), and the strategy of combining IASB with the United States financial accounting Standards Board (FASB) standard.

Here is our view that the current process should be reconsidered before these changes lead to consequences that people do not want to see.

Firstly, the importance and significance of accounting figures depend on the economic environment, including the regulatory framework, the industry and the country in which the company operates.

The US economy is driven by the stock market. The accounting rules of consolidated business reports are based on equity. If this rule is applied to other countries, such as Japanese companies, it will not bring meaningful results.

Because Japanese companies may be a business partnership.

The "one size fits all" model of financial statements seems to be good, but it is not the same in practice. There will be differences between users and users.

The basic theory of the financial reporting framework in the UK has overturned the above models.

In recent accounting problems, which are derived from the detailed rules, it highlights the question of whether uniform accounting standards are valuable and whether they are suitable for global adoption.

Some people in the UK worry that in order to get the benefits that may come from following the IFRS model, there may be some room for sacrifice.

Second, the company believes that the company is a competitor in the economic game, and that the accountant's scorer's concept will breed some unrealistic expectations -- the illusion of unified financial statements can bring benefits.

This idea also envisages that if a unified format is used in advance, the complexity of financial reporting can be effectively reduced.

The idea is falsely claimed that people do not want to see differences, which must be avoided.

However, how to identify a company's strategy, product and price in order to establish a monopoly position in the local market is the core of enterprise management.

Embracing unification (accounting standards) has created a costly multi-level industry, engaged in interpretation and execution.

The situation is that financial statements must be unified in form without considering the value of the users, and whether the compiling reports or users have their own interests in the global economic game.

The smaller listed companies, which are puzzled by the myth of "globalization and all people", are paying the price without any benefit.

Third, in order to make financial statements useful to non professionals, they must be able to understand.

Complexity will open the door to false positives.

For example, cash is simple, clear and difficult to manipulate, but cash based financial statements are incomplete.

Fair value involves a series of management decisions, and at the same time it is inevitably easy to be manipulated. Therefore, it is almost impossible to combine forms with content.

The applicability of the fair value model will reduce reliability and audits.

For example, how should we assess auditors' opinions on the increasing number of managers?

Fourth, a single global accounting standard means no competition.

How can we be sure that we have the right pattern (whether from the standard or the standard setting process)?

If there are no comparable things, how can we say that the global accounting standards can reduce the cost of capital, facilitate cross-border pactions or lead to the formation of the EU's single capital market?

A famous British fund manager has a high evaluation of the US GAAP account statement because it highlights the sensitivity of the accounting.

If there are no alternative accounting standards, it will lead to information leakage.

From the historical point of view, governments have formulated their own monopolistic standards to serve the local legal and economic environment.

The work of standard setters is based on analysis, investigation and solicitation.

Because people who participate in different opinions are different, they may make strategic feedback according to their own interests. The impact of the new standards is difficult to assess.

A local procedure, such as the FASB of the United States, will be influenced by domestic lobbying. If someone proposes a solution that is not welcome from a political point of view, it will also be accountable to the government.

IASB serves a wider population, but the direct political responsibility is lighter.

It is hard to see that these monopolistic procedures can produce effective results jointly or separately.

By raising competition between two or more independent standard setters, the company may raise its efficiency by enabling companies to use their standards and collect fees.

This kind of competition in standard setting enables users to compare the results of different accounting standards, gain from trial, and at the same time give birth to specific criteria for specific industries or companies of different sizes.

People have realized that competition in stock exchanges and bond rating agencies has brought benefits. Why not compete in the formulation of accounting standards?

Before the opportunity to gain benefits from the competition process is lost forever, we need to discuss the alternative accounting and norm setting models.

Before the implementation of the global accounting standards, we should think twice. The reasons are as follows: the importance and significance of accounting figures depend on the economic environment of the country where the enterprise is located.

It is impractical for us to anticipate the benefits that a unified financial statement can bring.

Fair value accounting involves a series of management judgments and is easy to be manipulated.

A single global accounting standard means losing competition and losing the necessity and space to try.

Stella Fearnley is a professor of accounting at University of Portsmouth, and also serves as a member of the UK Professional Oversight Board for Accountancy in Portsmouth.

James Frank, Professor of accounting, economics and finance at James School of management, Yale University, and is the president of the American Accounting Association, L. (Frank).

The above views are only personal views, and do not represent their institutional views.

FT Chinese net. Stella fenley / ZEHNDER