Innovation, independence, and influence: three reasons why America may want to reconsider having a single set of accounting standards worldwide.

Let’s begin with innovation. According to Professor Karthik Ramanna of Harvard Business School, adopting a single set of accounting standards worldwide, such as International Financial Reporting Standards (IFRS), could very likely undercut accounting innovation due to a lack of competition.

“One advantage of competing standards-setters is that these alternate accounting systems can coexist, and companies rather than regulators will have a choice of selecting into a particular accounting system — this allows innovation in performance measurement and innovation in control to happen,” explains Ramanna in this week’s cover feature titled “Are Global Standards Good for America?”

“Right now, the International Accounting Standards Board has decided that fair value is a central theme to IFRS, and they have also decided that principles accounting is a central theme to IFRS. This effectively means that the alternative accounting systems have been shut out from standards-setting, and one possible advantage of competition is that these alternative accounting systems can coexist,” says Ramanna, who recently completed a number of studies related to standards convergence.

Meanwhile, as for independence and influence, both lubricate the conflicted system of interlocking agencies and rule-making bodies (some government-run, some not) that presently comprise the American system of standards-setting. In forfeiting its authority over standards-setting, the U.S. will likely sacrifice both. ###