Summary
The present economic downturn has now got pundits and others saying that Accounting Standards are going to stumble - their will be no congruence on convergence of accounting standards. I would compare the present debate to that which took place when efforts were being made to salvage the gold standard in the first half of the last century. Then the intent was to keep the gold standard intact - it failed. The effort today is to keep national accounting standards in compartments - deny the concept of fair value - and generally keep accounting so complex that it is as difficult to understand as all the languages of the world - spoken simultaneously. In this analysis I look at why the development of accounting standards is going to continue and not going to be effected by the unnecessary arguments being floated in this context.
Analysis
1. Accounting Standards development in America was way ahead of the rest of the world till the late eighties of the last century. The efforts of the AICPA and then the development of concepts by the FASB gave detailed guidance on accounting statements presentation and interpretation.
2. In the UK the ICAEW gave a great impetus to principles development. At the same time accounting development in England and the rest of the world was guided more by judicial decisions until such time as standards came to be developed.
3. The rest of the world followed either of the two models - the American or the British.
4. Economic development was the guiding force to accounting and accounting standards development - just as it was to the decline of the gold standard.
5. Inflationary pressures brought about standards on inflation accounting in the seventies. The development of stock options brought about standards dealing with derivatives and stock options in the nineties and beyond.
6. The present situation is being guided by the economic developments on the world stage. The collapse of housing markets and credit and derivative markets points to the need for more integration and a single accounting language. In my opinion the convergence will continue after a small stumble as the economy progresses.
