More than 100 US companies could have the option of producing annual financial reports for 2009 in another accounting language. This is part of the US Securities and Exchange Commission's proposed "road map" to move public companies from US GAAP to international financial reporting standards, with a final decision in 2011 and a target date for conversion in 2014.

The SEC's long-term goal is laudable, since more than 100 countries have committed to adopt IFRS. However, the proposed short-term option is misguided. There are still significant differences between US and international accounting that will not be resolved by the end of 2009 and the mix of the two systems is likely to confuse investors.

Some of the differences are in critical areas of accounting such as pensions, intangible assets, financial instruments and revenue recognition. In addition, IFRS does not permit a popular form of inventory accounting, LIFO - last in and first out - which also has tax implications.

The two systems do, and will, produce different results. According to a Citigroup survey, the median net income for foreign companies filing financial statements with the SEC under IFRS is 6 per cent higher than they would have been under US GAAP. Although investors would see a reconciliation of IFRS accounts to US GAAP in the first year of a company's switchover, it is unclear if a full reconciliation would continue to be required.

In the SEC's view, the experience of large American companies as IFRS filers would provide useful information about the issues involved in changing accounting systems. In my view, this will only weaken the negotiating power of the SEC in designing the new governance structure of a global accounting setter - something it is clear we need to do.

IFRS are set by the International Accounting Standards Board which is currently financed by voluntary contributions. To be a truly independent accounting rule maker, the IASB must find a permanent source of committed financing. The IASB also needs some form of oversight from governmental bodies. The SEC recognises this need and is working with a Monitoring Group, comprised of regulatory agencies, to develop such an oversight function.

It will take several years to resolve these thorny issues about funding and oversight. It will take even longer to introduce IFRS into US college courses and to retrain professionals in audit firms.

IFRS not only contains different standards from US GAAP, but also takes a fundamentally different approach, based more on general principles that should be interpreted with judgment than on detailed rules that should be applied with precision.

The principles-based approach of IFRS has certain advantages. It would prevent an accountant from finding a loophole in a detailed rule to support a conclusion inconsistent with the rule's intent. It would also avoid the promulgation of rules with several hundred pages of complex guidance that is hard to follow.

On the other hand, a principles-based approach would be harder to enforce through lawsuits, because it permits considerable room for accounting discretion. More broadly, general principles can easily be interpreted or applied differently in various countries - thus, undermining the key benefit of one global accounting standard.

Under a flexible interpretation of IFRS, for example, France allowed Société Générale to move a loss from one financial year to another.

In short, giving 100 large American companies the option to adopt IFRS in 2009 is premature. During the next few years, the substantive differences between IFRS and US GAAP will hopefully be minimised. At the same time, the SEC should work closely with other securities regulators to establish permanent funding and appropriate government oversight of the new global standard setter. Most importantly, regulators should develop a package of principles and rules that would combine the best of both approaches to accounting.

Robert Pozen is chairman of MFS Investment Management.