Penny Wise or Pound Foolish?

by Tom Quaadman

Today's edition of the USA Today contains an article on the potential United States adoption of International Financial Reporting Standards (IFRS). The article looks at some of the issues involved, but the headline - "U.S. considers costly switch to international accounting rules" - gives you an idea of the story.

While the reporter did not, to my knowledge, contact the Chamber, the article notes the Chamber's support of converting the United States to IFRS. It goes without saying that the Chamber will not support the imposition of unnecessary burdens on American business. 

A global accounting system, if done right, will allow companies, investors, and all capital market participants to benefit from a single, transparent, predictable and well-functioning global financial reporting system. With 113 nations adopting IFRS as the standard, a global accounting system is already springing up around us. Why is this important? Because money is fungible.

In the days before a global economy, it was difficult for money and capital to cross borders. That is no longer the case. Therefore, in order to attract investment, it is important for an investor to compare apples to apples, rather than apples to oranges. Will IFRS conversion cost money and resources? Yes. Can the system be improved? Yes.

We need to answer two questions:

1. Can we improve IFRS and make the accounting language a better and more efficient system for issuers and investors?
2. What will be the economic loss to not switching over?

We need to spend our time wisely in answering the first question correctly. Getting the second question wrong will cause long-term harm that will prevent businesses from achieving maximum growth.

Over the past several months we have seen the economic impacts as our capital markets have frozen. It should be a warning sign as to inability to sustain growth without sufficient capital. If American businesses are to be competitive worldwide, let's intelligently give them the tools to compete.