INTERNATIONAL ACCOUNTING STANDARDS

Transparent financial reporting must reign supreme—not only here in this country—but around the world. Today, there is a growing tendency among exchanges to consolidate. Already, NASDAQ is discussing common links with foreign exchanges—such as the Hang Seng in Hong Kong and the Deutsche Borse. Pan-European investment approaches within a single currency environment will, no doubt, promote greater liquidity, lower costs and increased access.

As technology and the forces of more globally integrated markets redefine the operation of capital markets, new demands for capital are increasing that must be satisfied at a global level. There has been an international effort, as many of you know, on several projects to reduce differences in reporting and disclosure requirements.

We are very sensitive to the costs associated with non-uniform standards—particularly those relating to accounting. But as we attempt to answer the call for more harmony, we must focus, first and foremost, on the needs of capital markets, and capital market participants.

Our experience has clearly shown that high-quality accounting standards result in greater investor confidence—improving liquidity, making fair market prices possible, and reducing capital costs for all issuers, domestic and foreign. Participation in U.S. capital markets delivers great benefits—but membership has a price. While we are looking for ways to reduce costs, we won’t do so by diminishing the benefits our markets deliver to participants.

I don’t presume to demand that the world’s capital markets adopt our standards. But, any set of global accounting standards must result in transparency, comparability and full disclosure.

I know this orientation—this equity market culture—has not been the historical frame of reference in many countries. The Asia crisis and the contagion it set off have made clear the significance of transparent, timely and reliable financial statements.

Recently, the World Bank questioned international accounting firms who lend their credibility to audits of foreign companies. Some of these companies who wish to raise capital on international markets are practicing accounting techniques that simply don’t measure up. I share the World Bank’s concerns. If we want investors to have confidence in the numbers on a global basis, then auditors need to ensure that the highest quality independent audits are being conducted everywhere and anywhere.

Transparent financial reporting makes business sense not only by providing access to cheaper funds, but in opening new opportunities as well. Less than five years ago, Daimler Benz became the first major German company to list in the U.S. Looking back, I view Daimler’s listing as a turning point for the principle of shareholder value.

That listing was part of a transformation to an equity culture that delivers value—and information—to investors through the marketplace. As many have since noted, a U.S. listing gave Daimler the means— and I’m not just referring to capital—to gain acceptance of its bid for Chrysler.

Soon, we will move forward with our assessment of the core standards and the Commission will seek input from various constituencies, including financial executives. I ask that you be active in this process.

Help us by asking hard questions, and by engaging the process, as we seek to ensure that we have high quality international financial reporting standards.

Transcripts of Presentations of Experts

• James Leisenring from the Financial Accounting Standards Board
  Stephen Swad from KPMG Peat Marwick LLP
  
  
• James Leisenring from the Financial Accounting Standards Board
  Lynn Turner from the Securities and Exchange Commission
  
  
• Thomas Linsmeier from the University of Illinois
  
  
• Paul Pacter from theInternational Accounting Standards Committee
  
  
• Walter Teets from Gonzaga University
  
  
• Hamid Pourjalali from the University of Hawaii at Manoa
  
  
• Rashad Abdel-Khalik from the University of Florida