International Financial Reporting Standards
By Bobby Pastorius, Partner
It’s difficult to imagine that with all of the diverse cultures and ideas the world over that any one standard on any topic can meet the needs of all countries. But the financial industry may get it done and more quickly than many U.S. accounting firms thought possible.
Christopher Cox, the former Securities and Exchange Commission Chairman, introduced a roadmap converging the U.S. GAAP rules with global accounting standards in 2008. This roadmap is a timeline for U.S. based public companies to use to transition to the international financial reporting standards (IFRS).
Although the SEC’s attention to this project was diverted due to the financial crisis, James Kroeker, the SEC chief accountant, noted in a meeting on September 17, 2009 with the New York State Society of Certified Public Accountants that the U.S. is on track with the roadmap.
In fact, he observed that the crisis may have underscored the importance of the international standards. “Addressing issues such as off-balance-sheet accounting from a national perspective rather than an international one doesn’t make sense because of the interconnections among multinational companies and their investments,” explained Kroeker as reported in CFO.com.
There are many benefits to U.S. companies for adopting IFRS including promoting global competitiveness, strengthening U.S. markets, facilitating the management of U.S. based global companies and achieving significant cost savings and process efficiencies for companies that have offices worldwide.
In a Deloitte and Touche LLP survey of more than 245 financial executives conducted in July, 90 percent viewed mandatory conversion highly likely. According to D.J. Gannon, a partner in the U.S., “Those companies with plans and strategies in place will not only be better equipped to address IFRS-related changes, but they will also reap the benefits of IFRS sooner.” Deloitte is a global conglomerate with offices in 140 countries.
In an address to the annual conference of the International Organization of Securities Commissions held in Paris in May 2008, then SEC chairman Christopher Cox explained that Europe and nearly 100 countries worldwide require or permit the use of IFRS. “In order for IFRS to fulfill the promise it holds to be a uniter of the world’s capital markets and a powerful tool for investors everywhere, there are a handful of principles that are critical to its success.” These key principles include that the standards be crafted in the interest of investors, that the standards be transparent, and that the standard setter be independent and accountable.
Getting all countries to agree on standards will not be easy but with the worldwide economy it just makes good business sense. Although some countries such as India are on track to transition to IFRS in 2011, U.S.companies are viewed to transition by 2014.
For addition information on IFRS, look to these websites:
www.ifrs.com The site was created by The American Institute of CPAs and gives up-to-date information for all things related to IFRS.
www.iasb.org This site is the International Accounting Standards Board, an independent standard-setting body whose mission is to develop the IFRS.