IFRS: All hands on deck
More than 100 finance executives showed up for an IFRS session at the 2009 FEI Summit in Dallas when Deloitte Partner and Mid-America IFRS leader Rodney Lenfant posed the question:
"How many of you work for organizations that have made the switch to IFRS?"
One hand went up.
Lenfant tried again. How many, he asked, work for companies that have teams in place to plan their IFRS transition?
A few more hands went up ... but not many.
"It seems to depend on how global you are," Lenfant said. "That's what we'd like to see -- more organizations mapping how they're going to get there."
Plenty of questions have been raised recently about when U.S. companies will make the move to international standards. America seemed to be on the IFRS fast track when the SEC released its roadmap to convergence, but new SEC Chair Mary Schapiro applied the breaks shortly after President Obama took office.
Since then, FASB Chair Robert Herz has said it might be 10 to 15 years before the U.S. converges to IFRS, then followed that up by saying the U.S. should "consider adopting international accounting standards in the next three to five years, even if they are not completely converged."
Sounds like Herz is struggling to reconcile realism vs. optimism.
Regardless, the march toward IFRS will continue, Lenfant said.
"We will be moving toward a single set of global standards," he said. "There has been a little wavering (and) some cooling due to the economy, but we will eventually see it ramp up again."
Which means companies need to start ramping up now. But since (judging from the show of hands in Dallas) most companies haven't even begun to think about conversion, where should an organization begin?
Lenfant offered some ideas.
Step 1 is to develop an implementation roadmap and strategy. According to Lenfant, that means all hands on deck:
The accounting and reporting functions must study the effect of convergence on "consolidated and satutory reporting and accounting policies."
The folks in systems, process and controls must analyze the system architecture to understand the impacts of IFRS convergence on (a) existing applications, (b) general ledger structure and global consolidation, and (c) processes and controls.
The tax department needs to understand the implications of IFRS on the organization's tax and reporting structure.
Finally, executives need to study the impact of convergence on the overall organization, including (a) treasury and cash management; (b) legal, contracts and debt covenants; (c) employees, including training and compensation structures; and (d) internal and external communications.
Once these plans are put into place, Lenfant said, the organization can move toward actual conversion. But that won't happen successfully without a solid roadmap.
And know this going in: It's not going to be cheap.
"Everything we're hearing is that the cost of moving to IFRS is going to be more than the cost of (complying) with Sarbanes-Oxley," Lenfant said.
Still, we're hearing that IFRS convergence is inevitable and, in the long run, well worth the effort. What do you think?
IFRS at the Expo
Peter Margaritis, a CPA and instructor for the Business Learning Institute, will present a session on IFRS at the second annual Maryland Business and Accounting Expo, scheduled for June 16-17 at the Baltimore Convention Center. Get complete details and register here.