By ANNEMARIE FRANCZYK
Business First

U.S.-based companies have followed uniquely American reporting standards when compiling their balance sheets and financial statements. But that could soon change.

In recognition of the global economy, the country's accounting industry is working toward adopting the international practices that are used in almost 100 countries.

The development of a common set of accounting standards for both domestic and international use would provide "credible, comparable, conceptually sound and usable financial information" across all markets, according to proponents.

The effort has been underway for about six years but could pick up greater momentum now that the U.S. Securities & Exchange Commission has ruled that foreign public corporations need not comply with American accounting rules, and may opt for international standards. The SEC is said to be considering the same for public companies stateside.

The Financial Accounting Standards Board, which regulates the U.S. accounting industry, and the International Accounting Standards Board in London are working together to bring the international standards to this country. The international standards board was formed in 2001 to create a set of global accounting standards for the industry.

Right now, U.S. firms prepare their financial statements using generally accepted accounting principles, or GAAP. A change in the standards would require accountants to be educated on the new standards and trained how to apply them.

Paul Dayer, audit and accounting practice partner at Gaines Kriner Elliott LLP in Amherst, said accountants have to be aware of financial implications of cross-border transactions by their private companies with branches in Canada or the United Kingdom, he said.

But he is betting the impact of international standards will be "relatively small" for firms like his that don't have any public clients and few private ones with foreign subsidiaries.

The impact will depend on how far the reform goes. There could be a set of U.S. standards for companies with completely domestic business and a set of international standards for those with foreign subsidiaries.

Or there could be uniform imposition of international accounting rule for every business, regardless of scope.

Thomas Emmerling, managing partner at Dopkins & Co. LLP in Amherst, supports the shift to international standards.

Right now, his firm has clients with subsidiaries in Europe and the Far East and one just opened an outlet in Japan.

Dopkins uses consultants in those countries to help understand the differences in financial reporting.

"You just deal with it and reconcile it," Emmerling said. "It would be very nice if everybody used the same standards."

But he could see some challenges. For example: Should accountants translate past financial statements to reflect the international standard for use in historical comparisons?

The work, he said, would be substantial.

Additionally, U.S. professors would need to school themselves on the standards before they could teach them. The University at Buffalo offers a Global Accounting elective in its master's degree program and has plans to make it a requirement next year, said Ronald Huefner, professor of accounting.

The differences are not sweeping, but there are enough that would require retraining of faculty and wholesale rewriting of textbooks, he said.

Up until the SEC's decision earlier this month, companies with securities registered in the United States were required to either prepare financial statements in accordance with American GAAP or reconcile them to those rules. The SEC could extend the new rules across all markets.

Currency statements among issues covered

Reconciliation of currency on financial statements is among the issues involved in the standardization of U.S. and international accounting practices. Others are:

Costs associated with inventory capacity and storage

Classification of liabilities in refinancing

Gains and losses associated with asset exchanges

Definition of discontinued operations

Definition of joint venture

Reporting research and development costs

Source: Financial Accounting Standards Board