The prospect of convergence to a single set of global accounting standards, and financial instrument accounting, will be the most pressing issues in the accounting business in the year ahead, says Fitch Ratings.

The rating agency notes that a number of countries, including Canada, are gearing up to fully adopt International Financial Reporting Standards in the next two years, but firms in the United States are still waiting to hear the Securities and Exchange Commission’s plan to announce a decision on the adoption of IFRS by all public companies.

It says that the initial SEC ‘roadmap’ to convergence is now viewed by some participants to be overly ambitious, particularly the option to allow some companies in the U.S to adopt IFRS at the end of 2010.

“In spite of many perceived setbacks including political and regulatory pressures resulting in divergent FASB and IASB proposals on financial instruments, it is highly unlikely that the U.S. would completely withdraw from the ultimate goal of a single set of global accounting standards,” said Olu Sonola, director, Fitch Ratings. “The more likely scenario is for the SEC to amend the current timetable while establishing more milestones to lay the path to the eventual adoption of IFRS by all U.S. public companies as advocated by G20 leaders.”

Fitch also says that the accounting for financial instruments will be the industry’s other key issue. “In the U.S., the expected consolidation of many former off-balance sheet structured entities such as securitizations in the first quarter of 2010 will likely produce pockets of unexpected announcements by non-financial companies,” it suggests. Most of the effects will likely be on the balance sheets of financial institution, it says, adding that many banks have already disclosed the expected impact on capital and their balance sheet.

From a longer-term perspective, Fitch Ratings notes that analysts and investors should be aware of several other accounting changes that standard setters will continue to debate in 2010, including: financial statement presentation, lease accounting and revenue recognition.

IE