The convergence of UK and US accounting standards is likely to mean a shift from a principles-based approach to more rules-based methodology for British warns accountants KPMG but there is a belief the UK methodology will remain key.

There has been a long battle between regulators to reconcile America’s accounting methods with those that originated in Britain. US GAAP – generally accepted accounting principles – are based on firm rules whereas the International Financial Reporting Standards, developed out of UK standards and used in Europe and elsewhere, are based are based on basic principles without detailed rules on applying them.
     
America is now relaxing its past reluctance to compromise its standards to create a single global standard for producing accounts however. The US Securities & Exchanges Commission is taking a positive stance that could mean companies no longer having to reconcile the two reporting methods and may allow US companies to use IFRS.
     
Despite a past trend towards rules-based accounting it is hoped the changing US attitude will reverse that direction.
     
Sir David Tweedie, the Scots accountant who heads the International Accounting Standards Board, is fighting to retain the UK methodology, saying: “I hope the principles-based approach will gain the upper hand. Certainly that’s what we are intending to do. If we lose it now we will be rules based.”
    
Robert Herz of the US Financial Accounting Standards Board admits he is making concessions on the rules-based methodology. “On all the major areas we are working on now we are working with IASB, so hopefully they will be more principles-based,” he said.
     
Companies are divided about the extent of the concessions however. The head of Hanson’s audit committee, Baroness Noakes, fears there is insufficient international support to fight for the UK principles.

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