GLOBAL ACCOUNTING STANDARD: THE CASE OF ISRAEL BY LORI CULLEN
n 2008, the financial world stood at attention when Israel announced its intention to adopt global accounting standards to prepare public company financial statements. It was an aggressive move designed to make Israeli markets more transparent and negotiable for international venture capitalists and savvy investors. With implications for the United States, which still uses its national Generally Accepted Accounting Principles (GAAP), Israel’s announcement came at the perfect time for Lewis Shaw, chair and associate professor of accounting at Suffolk University Sawyer Business School. He was set to start a semester-long sabbatical at the University of Haifa, where he could observe the transition first-hand. “I thought the story we saw in Israel would be of interest to people in the US by potentially forecasting the kinds of problems one might encounter if the US undergoes the same conversion,” said Shaw. THE CHALLENGE OF INTERNATIONAL INVESTING
Home may be where the heart is, but the potential for higher returns, faster growth, and greater exposure to emerging economies and currencies has investors looking abroad. While there’s little investors can do to curtail potential pitfalls like political uncertainty in developing countries, the risks posed by lack of transparency and information may be decreased by adhering to a core set of accounting standards, such as International Financial Reporting Standards (IFRS). These standards, which were developed by the International Accounting Standards Board (IASB), are becoming the global standard for public company financial statements. 30/ Suffolk Business Magazine FALL 2011
Ariel Markelevich, associate professor of accounting (left) and Lewis Shaw, chair and associate professor of accounting at Suffolk University Sawyer Business School.
To date, at least 120 countries have adopted or are in the process of converting to international standards, and 90 countries have fully conformed, according to the American Institute of Certified Public Accountants. In the US, while the Securities Exchange Commission has not set a specific timetable for requiring publicly listed companies to use IFRS, convergence measures continue to render US GAAP and IFRS more similar. For now, however, converting to IFRS remains a hot topic. “The disadvantage is that a country gives up some control over accounting regulations. So instead of the country deciding what the accounting rules will be, IFRS does,” said Ariel Markelevich, associate professor of accounting at the Sawyer