If anything is more remarkable than the European Union's big-bang adoption of a new set of international accounting standards this year, it's the evaporation of the presumed superiority of U.S. accounting standards.
History has burdened U.S. GAAP with political compromises and reams of implementation guidance. That said, international financial reporting standards (IFRS) reflect both the rush in which they were written and the uneasy ambiguity that comes from eschewing guidance in favor of broad principles.
As senior editor Tim Reason reports in "The Narrowing GAAP," standard setters on both sides of the Atlantic have long recognized that neither U.S. GAAP nor IFRS has a lock on the transparency investors crave, nor the simplicity preparers desire. To converge them, then, FASB and the IASB decided to select, without prejudice, whichever standard improves accounting. If neither will serve, the accounting boards write a new one.
The astonishingly rapid pace of convergence proves the effectiveness of this approach. Yet it also leaves companies the world over wondering: Is the cost and burden of all this change really worth the theoretical benefits of global financial transparency? Will it ultimately lower the cost of capital? It's understandable, if shortsighted, that finance executives and politicians alike frequently tout their preference for the comfortable and well-tested boundaries of their local GAAP.
Protecting one's territory, after all, is a natural instinct, as technology editor John Goff examines in "Days of Wine and Mergers." Small, family-owned wineries are grappling with globalization, as multinationals buy up both market share and cachet. Here, too, many struggle against the perceived adulteration of their culture and product. There will always be those who refuse to drink Merlot. But there are also those who recognize, in the market and in their glass, the value of a good blend.