Financial Daily from THE HINDU group of publications
Tuesday, Jan 11, 2005
Financial Daily from THE HINDU group of publications Tuesday, Jan 11, 2005 |
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Corporate
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Accounting Standards `More regulation not answer for global accounting frauds' Our Bureau
Kolkata , Jan. 10 MORE and more regulation is not the answer for accounting frauds, which have been rocking the corporate world in recent times, said Prof. Bruce K. Behn, President, International Accounting Section of the American Accounting Association. Even as the global debate over the new corporate oversight environment in an era of tighter corporate governance rules continues, and as accounting professionals world over struggle to meet these new requirements, there has to be convergence between American accounting standards and the International Accounting Standards for a uniform global accounting standard to emerge. Addressing MBA students of the EIILM University here at an interactive session on `Issues pertaining to convergence of global accounting norms', Prof Behn said Governments should not get involved in the process of making accounting rules, as it may lead to hectic lobbying and political pressure. This responsibility should always remain with the private sector, especially if accounting irregularities such as those witnessed some years ago have to be nipped in the bud. Suggesting that there was a greatneed today to dispense with the market's fixation over earnings per share (EPS) numbers, he said the focus should be on long-term value enhancements for the investors. Pointing out that accounting problems simply boil down to the individual's greed, with undue stress by companies on short-term profits, Prof Behn said, "Greed cannot be legislated against." He said the International Accounting Standards Board (IASB) has to be "principle-based and not rule-based." Convergence towards an international accounting standard will make a great difference to emerging corporate governance rules, especially if international financial reporting standards have to improve in a big way, Prof Behn said. Conceding the need to accept some surprises in the financial numbers released by corporates periodically, he said the world has to get together on international financial reporting standards. Dr R.P. Banerjee, Dean, Academics, EIILM University, making a presentation on `Global Financial Settlement Process issues', called for objectives-oriented accounting standards, based on improved and consistently applied framework. He said FASB (Federal Accounting Standards Board) and IASB were now in a dialogue to evolve a new standard `Objectives-oriented Accounting System'. Seeking elimination of the various levels of the GAAP (Generally Accepted Accounting Principles) hierarchy, Prof Banerjee said FASB needs to reduce the dependence on industry practices and enhance control through a conceptual framework. He said FASB should redefine the standard setting process, review its literature to identify standards that are more rule-based and adopt a transition plan to change these accounting standards. International convergence, Prof Banerjee said, would come through development of a global accounting standard, convergence of cash flows from transactions in any foreign currency and by addressing issues of multi-currency transfer pricing.
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