At present we have different types of accounting satndards and audit practices prevelant all around the globe. Though they are more or less similar but there are many differences too. They have different disclosure requirements and different treament in some cases. This leads to maintaining different sets of books and financial statements for many Multinational Companies who are listed in stock exchanges of more than one country.

For eg. take the case of a comapny which is based in Europe and is also listed in New York Stock exchange. The company shall have to maintain books using European standards and the reconcile them according to the United States accounting. This costs a huge multi national millions of dollars each year.

But these multinationals have a reason to celebrate now. Recently, The world’s two top accounting boards have agreed to eliminate some of the biggest differences in their rules by 2008, bringing companies and investors around the globe a step closer to comparable financial statements.

The International Accounting Standards Board in London and the Financial Accounting Standards Board in Norwalk said that they will begin by setting a single standard for mergers and acquisitions.

The plan is to bridge enough gaps that foreign companies listed on U.S. exchanges won’t have to file a separate set of books.

This would lead to more transparency too as investors would be able to compare the companies spread accorss the globe more easily. According to me comparability is very crucial and important from an investors point of view. Every milestone that is achieved in setting up the common standards shall be help the investors and Accounting boards of other countries in the long run. Further, single set of standards would allow the world’s capital market with less friction.

Also, the common accounting rules shall give regulators enough confidence to let companies cross-list securities using only one set of books. That could save $1 million a year or more for many of the thousands of companies with stocks listed outside their home markets.

Siemens AG, Europe’s largest electronics and electrical engineering firm, is among the companies that have agitated for a single set of standards. Chief Financial Officer Heinz-Joachim Neubuerger has said that reconciling the books to U.S. accounting may cost the company as much as $83 million a year. Shares of Munich-based Siemens are listed on the New York Stock Exchange as well as in Europe.

“Siemens appreciates the development,” spokesman Wolfram Trost said Monday. “Everything that makes it easier for the company with respect to reporting is good.”

So once this happens, who knows we might also see ICAI trying to get as close as possible to the US accounting standards and GAAPs.

Also Read, KPO – An Emerging Opportunity For Indian Chartered Accountants.

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