Global accounting rules may face big delays

NEW YORK (Reuters) - The world’s top accountants are warning that plans by the United States to move to global accounting standards are vulnerable to major delays and the process could get very politicized.

In interviews during last week’s World Economic Forum in Davos, top executives from three of the Big Four accounting firms said discussions over a roadmap to move U.S. companies to international standards were reaching a crucial point.

The U.S. Securities and Exchange Commission has been reviewing public comments on a roadmap that would allow U.S. companies to use International Financial Reporting Standards (IFRS) by 2014. However, it is unclear whether SEC Chairman Mary Schapiro favors the timeline as it was drawn up under her predecessor Christopher Cox.

SEC officials said late last year that they are likely to consider further action early this year. The SEC wasn’t immediately available for comment on Wednesday.

“I don’t think you are going to rush to a global set of standards that everybody has bought into anytime soon,” said Bob Moritz, the U.S. Chairman at PricewaterhouseCoopers.

He said that the original date of 2014 for one set of rules could easily extend to 2020. “I think it possibly could be then -- I hope not, because I am a firm believer,” he said.

Moritz said that the CEOs of U.S. companies still had some major questions about moving to one set of rules, especially given many were still trying to dig their companies out of the financial crisis.

There was also concern about the way some countries in Central Europe were interpreting the rules, leading to doubts about whether a common set of standards was being created, he said.

“The next six months are going to be defining,” said Deloitte Touche Tohmatsu CEO James Quigley, who describes his position as more hopeful than confident that a single set of standards will be agreed soon. “The key is what the SEC’s position is going to be,” he said.

Quigley said that the biggest threat to reaching an agreement was if the politicians got too involved. “The single biggest risk is undue and inappropriate political influence into the standards-setting process.”

U.S. accounting rules makers came under huge pressure from lawmakers and bankers during the financial crisis to be more flexible in the way the rules on mark-to-market, or fair-value accounting were applied.

As credit markets froze, banks and other financial institutions blamed the rules -- which forced companies to put a market value on financial instruments -- for setting off a downward spiral of asset writedowns. Some said the rules were a major contributor to the crisis.

“We need an independent standards setting process that should be void of politics,” said Timothy Flynn, the chairman of KPMG International and its U.S. arm KPMG LLP. “But independence doesn’t mean isolation -- we have to consider the environment that we are in.”

Unlike Moritz, Flynn said he believes that major progress can be made in months, not years.

Still, talk to financier Stephen Schwarzman, the CEO of powerful private equity firm Blackstone Group BX.N, and there is little indication that harmony over accounting rules is just around the corner.

He said that if the U.S. rules maker, the U.S. Financial Accounting Standards Board, doesn’t change mark-to-market rules, it could be very damaging. “Fair value accounting as applied to private equity investments tends over time to get very odd outcomes,” Schwarzman said.

Moritz said that such views from CEOs are part of the reason he isn’t optimistic about an early move to one set of global rules.

“You come back to the practical realities that every CEO in the United States is saying, why am I going to pay for changing to new rules and regulations when I don’t buy into the motherhood and apple pie statement about the need for one consistent set of standards,” he said.

Reporting by Martin Howell; Editing by Gary Hill