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Cox Highlights Benefits of Global Financial Reporting Standards

In remarks at the annual conference of the International Organization of Securities Commissions, SEC Commissioner Christopher Cox acknowledged the increasing use of international financial reporting standards throughout the world. However, the use of IFRS has a relatively limited history, he said, which is why securities regulators should support the work of the International Accounting Standards Board and the foundation that oversees it. Cox said a key to the success of IFRS resides with the standards being drafted in the interest of investors.

The standard setting process must be transparent, according to Cox. Transparency will ensure investors' confidence as well as the integrity and quality of the standards. The IASB must be independent, he added, and it must be accountable. Accounting standards should promote clarity and comparability, in his view.

Cox noted that the IASB has instituted a number of procedures to encourage transparency in standard setting that encourage the input of constituents throughout the process. The IASC Foundation, which governs the IASB, continues to increase its funding from independent sources, a move that Cox supports. He said it is in everyone's interest to uphold the independence and professionalism of the IASB.

Cox reported that the IASC Foundation recently announced its plan to consider a new monitoring group to ensure the accountability of the global standard setter. The arrangement would preserve the independence of the IASB while enhancing the accountability of the IASC Foundation to national authorities, he explained. These mutually reinforcing objectives will serve the interests of investors, according to Cox.

The success of IFRS also depends on cooperation, Cox advised. The authorities responsible for financial reporting must discuss developments and promote the consistent application of IFRS, he said. Cooperation is necessary to prevent the dissolution of IFRS into a divergent set of standards applied differently by jurisdiction, he said. The sharing of experiences will help ensure that IFRS is developed, interpreted and applied consistently, in his view.

Cox pondered whether IFRS will become the single set of high quality global accounting standards. There is no question that a truly global accounting standard would be good for investors, he said. The real question is how quickly the accounting standards and the process by which they are established can be globally recognized as world class, he said. Cox is pleased with the progress that has been made over the past year to enhance the IASB's governance, and with the progress in converging U.S. GAAP and IFRS. IFRS represents not only new accounting rules, he said, but will also change the world.