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In the United States corporate issuers and investors have the familiar GAAP to rely on for their reporting, covering financial aspects of the publiclyowned enterprise; in Europe, the UK, and in many others nations there are International Financial Reporting Standards (IFRS). Increasingly, multinationals, or more properly large transnational enterprises, may use a combination of the two accounting and financial reporting systems.
U.S. standard-setters for Generally-Accepted Accounting Principles (GAAP)-by congressional action as part of Sarbanes-Oxley legislation, the Financial Accounting Standards Board (FASB), and the Securities & Exchange Commission (SEC) - are publicly committed to ongoing deliberations on harmonization of the two systems at some point. The differences have generally been described as being a rules-based (USA) or principles-based approach (non-USA) to corporate financial reporting (although accounting experts and the FASB point out that in practice there are many similarities). Whatever system is used, the movement toward adoption of extensible Business Reporting Language (XBRL) has become more universal. (Large-cap U.S. firms are now reporting in XBRL, as EU and UK have done previous to the U.S. adoption.) That may help narrow the financial accounting systems gap until more "harmonization" becomes reality.
We might here say that the traditional financial reporting aspects for most of the world's publiclytraded enterprises with a diverse body of shareowners relies on traditional approaches with wellestablished standard setters and wellsettled methods of establishing new rules under either system to accommodate changes in business practices. (Think of the changes needed as computer software emerged as distinct service/product category.)
Non-financial / intangibles reporting
Until now, we've been addressing the methods used for traditional financial disclosure and formal reporting of the state-of-the-enterprise to shareholders and regulatory agencies. While the two reporting systems-GAAP and IFRS-have their differences and many similarities, as more investors and stakeholders emphasize the importance of non-financial and intangible aspects of the business, an element of what many observers describe as part of the new normal of the capital markets, GAAP and IFRS fall short of what may be needed to satisfy investment demands or expectations for more information.
The players in new normal of the capital markets include a growing number of analysts, asset owners, and professional money managers focusing on new methodologies; new analytical models; new frameworks and systems for analyzing,...