The Reality of Accounting Standards - Political and Economic Challenges

Implications: Converging to one set of global accounting standards is ideal.  However political and economic factors will intervene.  Accounting standards reflect value systems.  Culture must be appreciated. 

Analysis: In a perfect world, accounting standards would be consistent across all countries.  However our world is dominated by many imperfections, or at least inconsistencies.  Such imperfections/inconsistencies come from cultural differences.
Let me give two examples.

The first example deals with law and the convergence of US GAAP and IFRS.  Both US GAAP and IFRS focus on providing useful information to the investor.   Both sets of standards are "value" centered.  However, the US culture is very litigious.  This forces accountants to be more sensitive to over stating value than under stating value (e.g.  lower-of-cost-or-market issues is a good example.)  Current value accounting (i.e., elements of IFRS) is hard on US accountants.

A second example deals with politics and the convergence of IFRS with the accounting standards of mainland China.   As a very large, evolving socialist country, China faces unique political issues.  For instance, China faces an enormous task of funding its state run defined benefit plans.  The country's population is aging.  Yet it requires newly privatized companies to use defined contribution plans.   Funding retirement is a big challenge that will be decided by politicians.  Disclosing information about this challenge may not be politically acceptable (e.g., tax implication).   

In summary, cultures must be harmonized before accounting standards can be harmonized. We are making progress. However we have harmonized the easy stuff. The more challenging issues still are in front of FASB, IASB, and other bodies.