Everyone in the corporate governance and financial reporting communities has become used to the American approach to business. It is a question of process first, process last, and, just in case things get slightly off-track in the middle, some more due process.
It has made for a mightily inflexible regulatory system and a complacent approach to any regulatory or corporate governance issues. It has become a process which relies on an underlying assumption that the whole system is so cumbersome and old that it must be right.
But things are changing. In August, speaking at the first meeting of the newly formed Committee on Improvements to Financial Reporting (CIFiR), the chief accountant of the main US regulatory body, the feared Securities and Exchange Commission (SEC), announced that he wanted people to consider “thinking outside the box”. This followed a speech by SEC chairman Christopher Cox, who said he wanted “an all-out war on complexity in accounting”.
“When it comes to giving investors the protection they need, information is the single most powerful tool we have,” said Cox. “And we can’t say we’ve achieved our objective if the information is provided in a way that isn’t clear to the people for whom it is intended.”
This speech is exactly the sort that people in the UK standard-setting community made in the late 1980s and which, in part, provided the impetus for the revolution in standard-setting that followed.
Cox continued by telling the CIFiR that their job was to help end “this destructive cycle” and “get our financial reporting system back to first principles”.
All over America, CFOs and financial directors were probably doing dances of joy. At last, the crippling bureaucracy was going o look at what really mattered.
So what happens next? Well, it is all down to a committee, so the answer is probably not too much. But the Americans are at least thinking a bit outside of, not only the box, but their comfort zones.
Robert Bruce is a leading commentator on accountancy issues.