The charm and risk in a principles based reporting architecture is that it simplifies reporting. It defines the fundamentals required for accurate, complete and transparent reporting and gives them an identity through interpretation. In simple terms, it acts as a charter, laying out what is protected and what is limited. Thereafter, it is up to a governing body to rule whether practice has adhered to the intent of that principle, or strayed from it.

If US adoption of IFRS is followed by leaving a multi-jurisdictional authority structure in place, where US, EU and Pan-Asian oversight decides how IFRS is applied, then we have the same game as today. Global earnings and balance sheets that are not comparable in material ways.

The alternative is creation of a multinational institution that acts with at least the standard of authority & competency the US SEC has established. To date, the SEC is the only world body with the seasoned and evolved experience with large market oversight, enforcement and staffing to accomplish the job. But it does so for the US, not the global conglomerate of economic powers that would adopt IFRS as their reporting charter.

Currently, the EU’s member nations principally rely on the audit firm as their gatekeeper, with no meaningful regulatory oversight beyond that. There are nation-specific securities market regulators but none with near the scope and staffing of the SEC. Adding Asia to the equation means several economically powerful nations & unions would have to agree on the governing purpose of a single institution, say, the protection of investors.

That alone will run into trouble with emerging economies interested in shaving a few points from protection and adding them to growth support. It doesn’t feel like an idea that has momentum or the kind of political support necessary to gain lift any time soon. Though I could see a US/EU alignment that eventually persuades the broader globe to sign on.