Michael Sharpe, former Deputy Chairman of the International Accounting Standards Committee (IASC), made the following comments before the 63rd Annual Conference of the Financial Executives Institute

(FEI).

There is an irreversible movement towards the harmonization of financial reporting throughout the world. The international capital markets require an end to:

1 The confusion caused by international companies announcing different results depending on the set of accounting standards applied. Recent announcements by Daimler-Benz [now DaimlerChrysler]

highlight the confusion that this causes.

2 Companies in some countries obtaining unfair commercial advantages from the use of particular national accounting standards.

3 The complications in negotiating commercial arrangements for international joint ventures caused by different accounting requirements.

4 The inefficiency of international companies having to understand and use a myriad of different accounting standards depending on the countries in which they operate and the countries in which they raise capital and debt. Executive talent is wasted on keeping up to date with numerous sets of accounting standards and the never-ending changes to them.

5 The inefficiency of investment managers, bankers, and financial analysts as they seek to compare financial reporting drawn up in accordance with different sets of accounting standards.

6 Failure of many stock exchanges and regulators to require companies subject to their jurisdiction to provide comparable, comprehensive, and transparent financial reporting frameworks giving international comparability.

7 Difficulty for developing countries and countries entering the free market economy such as China and Russia in accessing foreign capital markets because of the complexity of and differences between national standards.

8 The restriction on the mobility of financial service providers across the world as a result of different accounting standards.

Clearly the elimination of these inefficiencies by having comparable high-quality financial reporting used across the world would benefit international businesses.

Instructions

(a) What is the International Accounting Standards Board, and what is its relation to the International Accounting Standards Committee?

(b) What stakeholders might benefit from the use of International Accounting Standards?

(c) What do you believe are some of the major obstacles to harmonization?