Raphael Gordon, Guest Writer
Investors in different countries have, in the past, found it very difficult to compare companies' reported results as accounting standards may have significant variations.
The need for accounting standards to converge into one standard that is applied internationally is recognised.
The International Accounting Standards Board (IASB), in its quest for international convergence, continues to issue International Financial Reporting Standards (IFRS) together with interpretations to facilitate their practical application.
Jamaica has moved away from generally accepted accounting standards and adopted the IFRS.
The Seventh Schedule of the Companies Act, 2004, requires the accounts of companies to 'be prepared in accordance with generally accepted accounting principles promulgated by the Institute of Chartered Accountants of Jamaica, from time to time, or such other body as the Minister may prescribe'.
The European Union adopted IFRS, with some exceptions, for the financial statements of quoted companies in member countries.
In the United States, generally accepted accounting principles (US GAAP)are used to prepare financial statements.
Companies which file financial reports with the U.S. Securities and Exchange Commission (SEC) have to reconcile the figures to GAAP and highlight the differences between the two.
The SEC took a step towards the usage and acceptance of IFRS with a proposal this week to allow companies based outside the U.S. to file financial results using IFRS without reconciling the figures to GAAP.
This is a step in the right direction towards having all companies using the same accounting standard.
If this proposal is adopted, financial statements prepared in Jamaica would satisfy the criteria.
Companies would eliminate the cost of doing the reconciliation and highlighting the differences.
If the change goes through as currently proposed, the EU may have to revisit the modifications in their adoption of IFRS or continue with reconciliations to cover variations; or at worst, continue with the previous requirements.
The convergence project to bring GAAP and IFRS closer together continues.
Taken from the Financial Gleaner, Friday June 22, 2007.