SEC Moving Forward with IFRS Roadmap

This article is from the AICPA discussing the continuing progression of U.S. GAAP to International Financial Reporting Standards (“IFRS”). IFRS is widely recognized as the more practical approach to accounting, a principles-based approach in which the substance of a transaction and professional judgment drive the accounting determination. The convergence to IFRS is favored by many in the accounting industry who have long considered the rules-based approach employed by U.S. accounting standards as overly technical and as a result prone to accounting errors and restatement. By way of example, U.S. accounting standards have over 20,000 pages of authoritative literature, while IFRS standards have less than 2,000 pages of authoritative literature.

 In addition, although not referenced in this article, it is expected that private companies in the United States will be required to implement IFRS shortly after the implementation date for public companies, which is currently contemplated in 2014.

The SEC decided yesterday that it will issue a proposed roadmap for the adoption of International Financial Reporting Standards. This action is an important step in the move from U.S. GAAP to international accounting standards for public companies. The SEC will propose that IFRS reporting begin with years ending on or after December 15, 2014 if the interim milestones are met. The proposed SEC roadmap, once released, will be available for a 60-day public comment period.

AICPA President and CEO Barry Melancon supports the SEC roadmap, stating that the “AICPA supports one set of high-quality global accounting standards for public companies.” He added that the roadmap “continues a robust and thoughtful debate that is critical as the transition occurs.”

The AICPA believes that ongoing collaboration between the FASB, the IASB and the International Accounting Standards Committee Foundation will be instrumental in the shift to IFRS-based reporting using eXtensible Business Reporting Language (XBRL). During this transition, the AICPA is focused on making sure that the voice of U.S. CPAs is heard internationally. The AICPA is working with accounting educators, textbook authors and educational institutions to prepare future professionals to use IFRS. The AICPA also will begin to incorporate questions about IFRS into the Uniform CPA Examination.

To help members prepare for the shift to IFRS-based reporting, the Institute created www.ifrs.com in May 2008. The site facilitates access to IFRS publications, articles, conferences, educational courses, videos and links to additional sources of information. The site includes materials for auditors, financial managers, boards of directors and audit committees, and investors. An important tool on the site is the AICPA’s IFRS Backgrounder, which provides an overview of developments leading to convergence and highlights some of the differences and similarities between U.S. GAAP and IFRS. The backgrounder also is included in the September issue of the Journal of Accountancy.

The timeline set out in the roadmap is consistent with a 2008 AICPA survey showing that a majority of members polled believe it will take three to five years to prepare for IFRS. Thirty-four percent said they would need three years, and 31 percent said it would take four or five years.

The AICPA Board of Directors will comment on the proposed roadmap and members are encouraged to read and submit comments on the proposal as well once it is posted on www.sec.gov.