The US Securities and Exchange Commission (SEC) took a significant step in amalgamating American corporate standards with rest of the world by giving the go-ahead to a plan that could require thousands of US companies to change from the country's domestic accounting standards to global accounting rules that are quickly gaining favour abroad.
US accounting standards, known as GAAP or generally accepted accounting principles, are overseen by the Financial Accounting Standards Board, while the International Accounting Standards Board in London monitors global accounting rules called the International Financial Reporting Standards Group (IFRS).
The SEC yesterday unanimously approved a "road map" that might require large companies to adopt international standards by 2014, midsize corporations by 2015 and small businesses by 2016. Some large firms might voluntarily adopt the international rules even sooner.
SEC Chairman Christopher Cox noted at the commission's meeting that "the language of business and finance" is rapidly converging. More than 100 countries and the European Union have adopted or plan to embrace international standards, he said.
"One of the more revolutionary developments in the world's capital markets is the remarkable quickening pace of acceptance of a true lingua franca for accounting," Cox said.
There was a time when a mishmash of international accounting requirements created considerable confusion around the world. But in recent years, China, Canada, and dozens of other countries began merging their rules with standards adopted in 2005 by thousands of European companies.