Memo To The SEC: There Is Nothing Wrong With GAAP

The SEC is proposing that US companies give up the GAAP standard which they have used for financial reporting for decades. American public corporations would move to the International Financial Reporting Standards that are employed by a number of overseas firms now.

The thought behind the change is that investors would be better able to compare US companies with ones based outside the fifty states.

The action to adopt standards used for international company accounting is a shift in the wrong direction, According to the Forbes list of the 2000 largest public companies in the world, over 500 are based in the US.

The Wall Street Journal writes that "The U.S. accounting system, which is ingrained in textbooks, business schools and company treasuries, is based on detailed rules, while the international system expects companies to follow broad principles."

It is these sorts of detail that make GAAP the highest standard in the accounting world and the IFRS standards more prone to fungibility.

A change would put US investors at a disadvantage which would last for years. Virtually all investment analysis by everyone from hedge funds to Wall St. analysts to individual investors is based on GAAP. The standards are examined by experts and revised as necessary. The rigor of their rules speaks against tossing them on the scrap heap.

If the world wants one set of accounting standards, let them come to GAAP. It is the mountain and Muhammad can do a little traveling.

Douglas A. McIntyre

Douglas A. McIntyre