Do you speak IFRS?
The AICPA Governing Council has approved a resolution that named the International Accounting Standards Board and its International Financial Reporting Standards (IFRS) as a recognized standard-setter for U.S. CPAs to reference under Generally Accepted Accounting Standards (GAAP).
If accounting is the language of business, then we just approved the use of a global, international language that is necessary for the U.S. to remain competitive in a global economy. The U.S. will join more than 100 other countries that have adopted IFRS as the global standard -- most recently, Canada, Korea, India, Japan and Brazil, who are all on a convergence time line of 2010-11.
The resolution, which passed around 4 p.m. yesterday, amended Rule 202 (Compliance with Standards) and Rule 203 (Accounting Principles) of the AICPA Code of Conduct to recognize the IASB as a standard-setter. The resolution also had a provision that allows a reassessment by Council for the next five years to assure that the IASB continues to make progress on their financial and governance structure.
When will this take effect?
Most predictions put us on a 2013 timeline based on developments at FASB, SEC and other regulators. Yet when you think about comparable financial statements, putting two to three years of prior years with your current financial statements could mean you are thinking about IFRS as early as Dec. 31, 2010!
Isn't this only for public companies?
No. Actually, public companies will convert based on future SEC pronouncements. While they have already moved to allow IFRS (and eliminated a reconciliation to U.S. GAAP) for foreign subsidiaries, they have not approved it for U.S. filers. Technically, private companies could issue financial statements and auditors could opine on them under GAAP now that the resolution is approved.
Practically speaking, that is easier said than done as few banks or other lenders will understand or accept these today. Given the differences in rule-based U.S. GAAP (FASB) and principles-based IFRS, we wonder whether this could spell relief from the increasing complexity that our private company CFOs talk about?
Even many of our small practices are seeing global / international issues showing up in their small business clients. Transfer prices, foreign investment in U.S. businesses and foreign subsidiaries are more and more the norm. The world is truly flat and we have to keep up if we are to remain relevant as a profession.
We are beginning to investigate this deeper and gather resources to help you figure this out as it develops. Some recent resources that you might be interested in are as follows:
- Maryland Business & Accounting Expo: We will have several sessions on Wednesday, June 18 at the Expo that specifically address the most recent developments in IFRS (Session 253) , XBRL (Sessions 204 and 232), SOX (Session 211) and the latest on the new financial statement format being proposed by FASB and IASB featured in CFO magazine (Session 225).
- A webcast on July 17 from noon to 2 p.m. titled, "IFRS: An Overview of the Looming Change to Global Standards."
- A seminar on Dec. 15 titled, "International versus U.S. Accounting: What in the World is the Difference"
- IFRS: Implications for CPAs
- The Move to Convergence
- More podcasts: The Road to XBRL, Dissecting the Proposed New Financial Statement Format, and Partners' Biggest Worries
Tell us about your global issues: What is your take on this?