have been persuaded to comply with IASC standards; listed companies in Italy are
required, in the absence of local requirements, to comply with IASC standards; and
the listing requirements of the London Stock Exchange include compliance with
IASC standards or disclosure explaining any deviation from such standards.
A second project aimed at harmonization of international standards, the establish-
ment of the IFAC, began in 1977, and U.S. accountants also participate in this body.
The IFAC has a membership similar to that of IASC. IFAC’s purpose is the develop-
ment and coordination of worldwide auditing standards. Like the IASC, the IFAC
must also rely on voluntary acceptance of its guidelines, and successful completion
of IFAC’s goal is dependent on its members being able to have the IFAC pronounce-
ments implemented in their respective countries. (See Chapter 16 for a further de-
scription of IFAC.) In October 1982, the IASC and IFAC entered into an agreement
to create a formal relationship between the two bodies. According to the terms of the
agreement, the membership of the two bodies was unified in January 1984, and the
IFAC was given the authority to nominate the 13 countries chosen for the IASC’s
Board. The agreement also provided that the IASC would be the only party with au-
thority to issue or promulgate international accounting standards or to promote
worldwide compliance or acceptance of these standards.
Since the agreement, IASC has continued to make a great deal of progress. In an
article by IASC’s secretary general, David Cairns, in December 1989, entitled
“IASC’s Blueprint for the Future,” Cairns stated that there had not been enough
progress to ensure that financial statements of companies from different countries
would be readily comparable by users worldwide. In an attempt to better achieve this
goal, in 1989 the IASC published Exposure Draft 32, Comparability of Financial
Statements(the “Comparability Project”), which addressed the different choices of
accounting treatment for like transactions and events which are available under in-
ternational accounting standards and result in a loss of comparability and under-
standability of financial statements.
The basic purpose of IASC’s Comparability Project was to provide a set of ac-
counting standards that can either be used to reconcile multinational prospectuses or
to prepare financial statements for multinational prospectuses. In other words, it was
the beginning of an attempt to formulate global GAAP. A new set of IAS standards,
with fewer options than was previously the case, came into effect in 1995.
Comments of the SEC and other regulating bodies made at the annual meeting of
IOSCO in Paris on July 11, 1995, indicated that harmonization of international ac-
counting standards is most likely a process that will continue to evolve over a num-
ber of years. Former SEC commissioner Steven M. H. Wallman said, responding to
a question relating to the SEC’s reaction to IOSCO’s and IASC’s plan to set up in-
ternational accounting standards, “Our goal is to have the highest level of standards
possible. The closer [the IASC] comes to that, the better.” On August 3, 1995, IOSCO
and IASC announced that they had reached an agreement on a work plan to establish
an international set of accounting standards by 1999. The IASC subsequently an-
nounced a “fast-track work program” to complete a core set of standards by 1998, a
year ahead of schedule. The IASC completed the core set in December 1998 with the
approval of IAS 39 and IOSCO began reviewing those standards in 1999.
In 2000, IOSCO recommended that its members allow multinational issuers to use
30 IASC standards in cross-border offerings and listings. The European Union voted
in the summer of 2002 to require all publicly listed EU companies to use IAS for
quarterly and annual filings.
14.5 RESPONSE TO GLOBALIZATION 14 • 19