Convergence could present short-term

The convergence of rules-based and principles-based standards
may potentially have a short-term benefit for a firm’s revenue but
would require them to invest more in staff training, according to
the global chief of a mid-tier network.

Baker Tilly International president Geoff Barnes made the
comments following a panel discussion on the issue organised by the
Institute of Chartered Accountants of Scotland and the European
Federation of Accountants in Brussels this month.

He told IAB the revenue of accounting firms could
initially increase if there were a transition to different
accounting standards, but it would then tail off, much in the same
fashion as the compliance work associated with the Sarbanes-Oxley

Barnes said: “If there’s going to be a transition to different
standards, people are going to need advice. And if people need that
advice they are going to pay for that. We are seeing this globally
with the introduction of IFRS where the Big Four all cited the
introduction of those standards as a major contributor to an
increase in their revenues in growth, but that’s not going to be
around forever.

“Firms were doing very well giving good advice [on Sarbanes-Oxley] two or three years ago but that has eased off considerably as
companies have got used to what they have to do. and I think the
same will happen with principles and rules.”

Convergence costs

Barnes believes the costs of conforming to converging standards
will vary depending on the complexity and geographic spread of a
client. “If you’ve got a number of groups of companies in a number
of countries, each using different standards, then there will be
more time and more effort in adjusting the figures to reflect
IFRS,” he said.

The consensus of the Brussels panel discussion, Barnes said, was
that the profession largely accepts principles-based standards but
with “bells and whistles”. He added it was vital to have a
consistent global view about which path to take on the issue.

Nicholas Moody