Reference no: EM132942131

'To converge to a single set of standards is now crucial'

'The success of an accounting framework comes from the widespread acceptance that it provides a reasonable basis to assess past performance and forecast future returns. That also requires the accounting framework to contribute to an understanding of the variability of return: risk, in other words.

'How much more difficult would that task be if every nation still clung to its own language for defining commerce? How much simpler would it be if everyone could understand each other perfectly? The current crisis has increased focus on what has worked well and what has not. It reinforces the need to move together to make things better and we are seeing real momentum towards achieving a shared universal language of accounting. That's why converging to one set of accounting standards has never been more important and the current financial market crisis is acting as a catalyst to accelerate that path.

'Unfortunately, just as great strides have been taken towards the formation of global accounting standards, some commentators look to shoot the messenger (the International Accounting Standards Board). They point to unintended consequences and asymmetric outcomes to question the accounting framework. They complain when the rules don't change to suit their position and they claim lack of governance when changes, with which they disagree, are made quickly to respond to calls for clarification or correction.

'Within an independent standard-setting process, it is inevitable there will be differing views. That some stakeholders feel aggrieved at the outcome of the debate is evidence of the integrity and independence of the consultation process.'

Source: Flint, D., 'To converge to a single set of standards is now crucial', Financial Times, 6 November 2008 (abridged).

Questions

1. What is meant by an 'accounting framework'?

2. Why do some commentators regard changes made to correct and clarify global accounting standards as indicating a 'lack of governance'?