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Is "Convergence" Good for Investors?

by Michael W. Stocker
Eyes On Wall Street |

Maybe not, at least according to a new white paper released by the Council of Institutional Investors.

The furor relates to the SEC's proposal that Generally Accepted Accounting Principles ("GAAP") issued by the U.S. Financial Accounting Standards Board be replaced with International Financial Reporting Standards ("IFRS") issued by the International Accounting Standards Board-a process called convergence.

In a paper titled "Criteria for an Independent Accounting Standard Setter," Professor Donna L. Street of the University of Dayton expresses concern that the international standards suffer from "significant pressures from governmental officials and bodies, particularly those representing the European Union." In addition, she notes that the IASB has historically subsisted on voluntary contributions-raising serious questions about the its independence. The white paper further points out that only five of the present 20 seats on the IFRS Foundation are held by individuals from the investor community.