We asked candidates for our Top 100 Most InfluentialPeople in Accounting the following question:
"What do you think of the current attempts to createa single set of global accounting standards (whether through convergence or theadoption of IFRS world-wide)? Should they be pursued differently -- or atall?"
Their responses reflected a wide range of opinion, andrepresent the opinions on nearly every side of the debate. All the candidateresponses are presented below.
The time for a uniform set of global accounting standardsis upon us. We work in a global economy, so agreement on an internationalstandard is paramount. Full convergence on rules will take time -- especiallyas the economic factors continue to shift (like regulating derivatives), butthere needs to be general agreement on the guiding principles in the meantime.
-- Mark Albrecht, CEO, XCM Solutions
Convergence of accounting standards toward a common setof high-quality accounting principles is in the public's best interest andwould provide a more uniform language for financial reporting. Crowe supportsthe Financial Accounting Standards Board's and International AccountingStandards Board's joint efforts to improve GAAP and achieve convergence. Therapid pace of change and proliferation of complex standards may createchallenges for some stakeholders, including some in the financial statementpreparer community. Adequate time to react to changes and new standards, and anintensive effort to inform all stakeholders of these changes, will need to beprovided, especially with a view toward global implementation. Local variationsin application of common concepts that reflect economic and environmentaldifferences may also be expected.
I personally believe that achieving a single set ofhigh-quality global accounting standards is a very important goal. However, Ialso believe that we are a fair distance away from achieving that objective.Some of the momentum around IFRS has downplayed a few real challengesassociated with uniform adoption of IFRS. Unfortunately, many countries haveadopted IFRS with exceptions -- not fully adopting the standard IFRS model.This trend illustrates the much more active involvement of European governmentsin accounting standard-setting, compared to in the U.S., making it atroublesome aspect of global IFRS adoption today. I also believe that many haveunderestimated the degree to which the "concepts-based" IFRSstandards will migrate toward the "rules-based" structure that existsin GAAP today. In fact, the SEC issued comment letters that speak touncertainties of this transition. We have "rules-based" standards inthe U.S. today largely because of our financial reporting environment, and achange to IFRS will not necessarily change that dynamic.
-- Charles Allen, CEO, Crowe Horwath LLP
The concept of a single set of global accountingstandards, considering our global economy and the prevalence of cross-bordertransactions, makes great sense. However, the burden and cost of implementationduring the current economy is a large hurdle for some companies. In the longterm, I believe a single set of global accounting standards will be verypositive.
-- Jordan Amin, Chair, National CPA Financial LiteracyCommission, AICPA
The concept is good. But there are a couple real-worldissues to resolve. The first is that many countries that have already adopted,or are expected to soon adopt, International Financial Reporting Standards have"country modifications" -- if this is prevalent, we do not reallyhave common standards. A second issue is that standards must be relevant anduseable -- currently, there is a legitimate question as to whether one set ofstandards can meet all needs of public companies, private companies, etc. andthat must be resolved.
-- Rick Anderson, Chairman and CEO, Moss Adams
The proposed convergence between U.S. GAAP and IFRS isone of the most critical and controversial issues to affect accounting in theUnited States.
More than 100 countries currently use IFRS, a number thatis set to rise to around 150 countries over the next five years. Asmultinational businesses continue to grow and expand, a thorough knowledge ofIFRS is now essential for internationally active, growing businesses.
Convergence efforts have been in place for nearly sixyears. After the initial SEC "roadmap" was issued by then-SECChairman Christopher Cox, the administration changed and Mary Schapiro steppedin as chairwoman. Shortly thereafter, the global economic and credit crisishit, consuming the SEC's time and focus. In addition, as U.S. FASB and the IASBcontinue to work towards convergence, some plead, "Let's just let thisprocess work," which causes the progression to slow even more.
But the movement has been gaining steam with a new rulingfrom the SEC, recent actions on the part of the AICPA and growing support fromcompanies that do business abroad.
There seems to be worldwide consensus surrounding theneed for one global set of high-quality accounting standards and that IFRS iscurrently best positioned to fulfill that need. However, there is much to begained from U.S. GAAP and, as such, the convergence of U.S. GAAP and IFRS mayvery well best serve the needs of the global community.
For companies that do business overseas, or those withglobal aspirations, the use of converged IFRS represents an opportunity tospeak the same financial language as their global counterparts. It willrepresent a substantial opportunity to seamlessly use and provide financialinformation around the world. For acquisition of capital, it makes it easierfor everyone involved without having to use two sets of languages.
-- C.E. Andrews, President, RSM McGladrey
There is no doubt that global markets need a single setof global standards. Without one, investors will be unable to fully assessinvestment options that are now globally available. Having such a standardwould also increase the accessibility of cross-border capital. Formultinational firms, they would have one set of financials for reportingpurposes that would be acceptable around the world.
These points have come more to the forefront during therecent economic meltdown. We have indeed reached the point where globalbusinesses, financial and capital markets are interrelated. Without a singleset of standards, we will become like the Biblical Tower of Babel.
-- August Aquila, President and CEO, Aquila GlobalAdvisors
As part of the natural progression of economicglobalization, it stands to reason that agreed-upon global standards are inorder. So, yes, they should be pursued, agreed upon, and established. Thiswould dramatically decrease all kinds of risks, from legal contingencies tofraud, and make international business more efficient. Right now, it's as if wehave national railroads with different-gauge tracks in each country. At best,it's terribly inefficient; at worst, it simply doesn't work. I acknowledge thatthe IFRS are controversial: As proposed, they are more principle-driven thanour rule-driven U.S. GAAP accounting, and thus more open to interpretation. ButI think that interpretation and flexibility are necessary. The differences inthe cultures and business practices of each nation have to be considered andthat requires flexibility. I think that convergence will likely be the bestvehicle for migration and eventual international adoption because it will allowthe standards to evolve as they are practiced.
-- Andy Armanino, CEO and managing partner, ArmaninoMcKenna
The creation of a single set of high-quality standardswill benefit U.S. financial markets and public companies. At CPA2Biz we arecommitted to helping provide the accounting profession with information andtools related to this convergence through our Web site, IFRS.com
-- Erik Asgeirsson, CEO, CPA2Biz
The process is too much and too fast, especiallyconsidering the state of our economy, legal system vs. global, and the need toassure the U.S. public of due process and independence in accounting standardspromulgation. The process of accounting standards convergence must slow downand acquire the broad support of the U.S. public, financial statement users,preparers, practitioners and regulators.
-- Billy Atkinson, Chairman, NASBA
I think that the political, cultural and governancechallenges associated with getting global adoption of a uniform set ofhigh-quality accounting and financial reporting standards accomplished are farmore difficult to deal with than the technical accounting issues, and willlikely prevent the achievement of that goal. Still the convergence goal shouldbe pursued to the extent feasible, and any remaining differences should beidentified so that financial statement users can better consider the impact ofsuch differences.
-- Robert Attmore, Chairman, GASB
Accounting standards need to be relevant to industry andfinancial statement users, not developed in a theoretical world by people whodon't have to pay a price for their errors. Economists don't like monopolies.There should be different standards competing and the stock markets shoulddecide which standards their listing companies adopt. This would inject apricing mechanism to test the real efficaciousness of various standards. Letthe free market decide which standards to adopt. As with the 50 states, thesewould be laboratories of innovation, with price being the relevant indicator ofwhich set of standards were most useful and relevant, reflected in a lower costof capital. The idea that there should be a single, top-down, imposed set ofstandards (whether GAAP or IFRS) is an anachronism in a dynamic knowledgeeconomy.
It would also be superior to have CPA audit opinions readlike movie reviews, allowing auditors to communicate judgments about where theyare not entirely comfortable and where they are.
Comparability is overrated, and it's not going to happenanyway. This idea would be far superior to the status quo. All financialstatements are lagging indicators anyway -- similar to timing your cookies withyour smoke alarm. We have to compare any change to GAAP to the status quo, notsome perfect Utopia that's never going to exist here on earth.
-- Ron Baker, Founder, VeraSage Institute
I see an analogy in the drive for a single set ofaccounting standards to our work to achieve CPA mobility. Mobility is necessaryto help create a seamless U.S. profession, something that the vast majority ofstates now recognize. Likewise, the move to create one set of global standardsrecognizes that we are operating in a borderless, i.e., seamless, businessenvironment.
-- Sheri Bango, Vice president of practice mobility andstate regulatory & legislative affairs, AICPA
A single set of standards is imperative given globalmarkets today, and IFRS is a reasonable path. With the impact of globalizationand large developing economies such as China, Brazil and India, effective,meaningful comparisons between entities are absolutely critical. The U.S.accounting profession, guided by the efforts of the AICPA and the IFAC Planningand Finance Committee, continues to be very active in setting those standards,and in helping with implementation. A major concern is that internationalstandards are impacting private companies as well as public companies as thestandards are mandated and, as a result, the impact will not escape even thesmallest accounting firm, yet the appropriate training in small firms may notbe in place. The AICPA and IFAC are aware of this issue, and are stepping up toit.
-- Jon Baron, President - Americas, Workflow &Service Solutions, Thomson Reuters Tax & Accounting
I support the goal of establishing a single set ofhigh-quality international accounting standards to enhance the comparability offinancial information and the efficiency and effectiveness of capital formationand allocation, if that is in fact what IFRS are and that is what they do.
If the SEC moves forward with IFRS adoption prior toconvergence, what is most important is ensuring that the standards are of ahigh quality. U.S. GAAP was the gold standard for so many countries for so longbecause it was considered the highest-quality set of accounting standardsanywhere. U.S. GAAP may not be flawless, but the words "prepared inaccordance with U.S. GAAP" send a message to the financial statement userthat the methods under which the financials were prepared have been tested andare trusted. U.S. regulators must demand that "prepared in accordance withIFRS" -- or "U.S. IFRS" if it comes to that -- guarantees thesame level of trust and reliability.
Which raises another issue: How will the comparability offinancial information across countries be improved upon if each countrydevelops its own version of IFRS? The comparability of financial statementsprepared in conformity with IFRS may be overstated. The roadmap as currentlyproposed does not enhance the comparability of financial information that wouldbe achieved through convergence.
-- Joanne Barry, Executive director, NYSSCPA
While the objective of global accounting standards seemsobvious and noble, there exists far too much deep and long-lasting disagreementin many basic accounting theories to make this practical and useful. Forinstance, "fair value accounting" has serious regulatory andfinancial consequences to a company and its nation, and its application mayhave serious unintended economic consequences. However, I am afraid that thegenie is out of the bottle and continued enormous effort will still be devotedto its ultimate realization. Nevertheless, adoption of those standards will bedifficult.
-- Tony Batman, Chair, CEO and president, 1st Global
Though the transition will be, and is, troublesome andcostly, a single set of global accounting standards is necessary, particularlyas the world is moving closer and closer to a global economy. This is clearlyevident in the current recession we are experiencing in the U.S. because theentire world has been affected. Whether it will be the convergence ofaccounting standards or adoption of IFRS, one or the other must ultimatelyhappen and if not now, sometime down the road.
-- Parnell Black, CEO, NACVA
Please note that the opinions expressed here are purelymy own, and not those of the SEC, the commissioners or the staff ...
While I don't think a single standard is a prerequisitefor growth and prosperity, it could facilitate markets and the deployment ofcapital in ways that would support growth and prosperity. That is, as long asstandards are not sought as end in itself -- which it sometimes feels like --but because they would improve transparency through better disclosure and dataavailability, investor insight into company performance, and managementaccountability to markets.
-- David M. Blaszkowsky, Director, Office of InteractiveDisclosure, SEC
Globalization is a reality, but a single set of globalstandards will take significant effort and time because of politics and worldeconomic conditions. We should continue to pursue, but not lose focus on, theimportance of public versus private company GAAP. IFRS requires leadership,relationships and creativity in order to succeed.
-- L. Gary Boomer, CEO, Boomer Consulting Inc.
I believe that a single set of standards for publiclyheld companies and companies doing business worldwide is long overdue. For manyyears now we have been a global economy. Technology has been the single biggestcontributing factor to this phenomenon. Technology has allowed companies toreach further to sell products and services than ever before. Having said that,most closely held companies have no reason to adhere to these same complicatedstandards. I am a huge believer that there should be a "scaled down"version of IFRS for companies that don't fall into the "public" or"international" mold. I believe these alternative standards shouldstill fall under IFRS, but kick in based upon revenue size or marketplace.
-- James C. Bourke, Partner, WithumSmith+Brown
They should definitely be pursued with full vigor. Asingle set of high-quality accounting standards would provide the comparabilitythat cross-border companies and cross-border investors and global capital marketsneed in today's globalized environment.
The accounting standard-setting process must be robust,transparent and independent, free from political interference and underpinnedby appropriate due process that gives all stakeholders an opportunity toprovide input.
It's important that accounting standards are notpoliticized but focused on providing relevant, timely and transparentinformation for investors and other users.
Jurisdictional variations undermine the ultimate goal ofa single set of high-quality accounting standards. Regulators andstandard-setters should resist modifying IFRS. They must get comfortable withthe IASB's standard-setting process and work through those channels.
-- Beth Brooke, Global vice chair, Ernst & Young
The marketplace has spoken. As the remaining economicpowers and U.S. trade partners (China, Japan, Canada, Brazil and Mexico)complete their road maps to adoption, U.S. accountants will be forced to haveexpertise in IFRS (for thousands of U.S. subsidiaries of foreign-ownedcompanies), no matter what the SEC does. The SEC needs to recognize that IFRSis the quality global standard and that trying to maintain a separate U.S. GAAPwill not serve investors or other public stakeholders.
-- Robert Bunting, President, IFAC
The economy is definitely global in nature, and as such,it is imperative to have global accounting standards. One of the primary rolesof the accounting profession is to attest to fairly presented financialstatements. I believe that once a universally acceptable IFRS evolves, it willbe easier for accountants to fulfill this obligation.
That being said, I am pleased that the AICPA is taking avery active role in IFRS. U.S. GAAP is understood in our financial community,and I do not want to see our financial reporting standards compromised byadopting IFRS. I would not have any issues with U.S. business preparing GAAPand IFRS financials.
At this stage, once the IFRS are adopted, I believe thevalue generated will exceed the cost of compliance. We will be operating for aconsistent framework for evaluating the health and performance of a business.
-- Peyton Burch, Director of partner programs, Deltek
Grant Thornton has been, and continues to be, staunchsupporters of the ongoing movement toward one set of high-quality, globallyaccepted accounting standards. As CPAs, we view financial reporting as a uniquelanguage used to communicate the economic results of a company's activities andfiscal health. At present, that language features several different dialects,depending on where a company operates. As businesses continue to expand theirinternational footprint, it is increasingly sub-optimal to be using differentreporting standards, a situation which sometimes increases costs, whiledecreasing comparability. Just as international business has benefited over thelast 30-odd years from the increased shared use of English, so too will globalcompanies reap the benefits of one financial reporting language.
The stakes are high. Whether the U.S. races or crawls towardIFRS could mean the difference between staying in front or falling behind. Therest of the world is moving forward, boldly. Major economies like Japan, Chinaand India have already chosen IFRS. It is unrealistic -- and risky -- to thinkthat we can stand outside looking in forever. If we don't want our influenceand opportunities stripped away, we must make sure that we keep a seat at thetable.
Thus, in brief, the primary reason for moving toward IFRSis competitiveness. I think it will become increasingly difficult for the U.S.capital markets and U.S. organizations to compete in a world in whichpotentially we're the only country operating under a different set ofaccounting standards -- and therefore a different financial language. Myconcern is that if we do not now accelerate our move toward adoption, we willincreasingly be less influential in the development of IFRS. Evenpost-adoption, IFRS must never truly be final (i.e., change is a given in theeconomic environment and thus agility is essential in standard-setting). Theywill also never be perfect when eventually adopted. There remain myriadunresolved issues related to the standard-setting process, the governance andfunding of the standard-setting process, as well as serious and valid concernsabout government intervention in IFRS standard-setting.
There are also emerging concerns about differentcountries that have already adopted IFRS in slightly different,country-specific ways. These counterproductive possibilities must be dealt withif we are to meet the ultimate objective - global consistency, clarity andtransparency.
As I summarized above, our position at Grant Thornton, asthe U.S. member firm of a global organization, is that we need to pursueresolution more aggressively; i.e., within a time frame founded on a "datecertain." I think if there is a stake in the sand, the U.S. would becompelled to take a more focused approach to overcoming some of thesechallenges and difficulties.
We are equally concerned about another related, butcomplicating and counterproductive, shift -- convergence. Convergence is not apath to a single set of high-quality global standards. IFRS is a set ofaccounting standards that have already been adopted by a number of countriesaround the world. Convergence is the effort to take U.S. standards and makethem compatible with international standards.
In theory, this approach represents a perfect solution.Theoretically, you could converge U.S. standards with international standards,but it's already clear that we won't necessarily end up with U.S. standardsmirroring IFRS. Early evidence reveals that we are moving toward U.S. standardsthat are relatively compatible, but remain nuanced variations on the theme.Today in the United States, we require businesses to adopt a number of new U.S.standards based on the convergence process. Those who are adopting thesesomewhere-in-between standards are likely to have to switch horses once againto comply with yet another set of standards when they adopt IFRS. The situationis really starting to frustrate businesses and investors, and it will certainlysap greater vitality in the global capital markets.
Finally, at Grant Thornton, we support the SEC'sperspective that there is more work to do and thus, the process requires moretime. However, we also believe that by agreeing on a date certain, we couldfacilitate the process and make the ultimate agreed-upon standards moreeffective.
-- Stephen M. Chipman, CEO, Grant Thornton
Given the continuing evolution toward a world economy,globally recognized accounting standards are becoming more and more essentialmoving forward. In my opinion, this is an important development and rapidadoption is as important as ever.
-- David M. Cieslak, Principal, Arxis Technology Inc.
The shift to a global economy calls for the developmentof standards that make financial statements comparable across borders. Theorganizations involved in the process, such as the SEC, will need to take stepsto ensure that companies and accounting professionals are provided with thetools to make the proper adjustments accordingly.
-- Scott Cook, Founder, Intuit
I think the goal of a single set of high-quality, fullyvetted, global standards for publicly held companies is appropriate and shouldbe pursued. However, the effort to over sell IFRS under the guise that,"Every country except the U.S. is doing it" is missing the mark andhurting the attainment of an appropriate goal of one set of standards.
The misinformation and outright hype and exaggeration ofthe acceptance worldwide of IFRS is not helping to convert federal and stateregulators. It seems to me that before the "big sell" was made onIFRS in the U.S., much elementary work was and is required: Who is covered?What are the standards and what about the carve-outs? Why is IFRS superior toGAAP? Which entities should use IFRS? How should IFRS be developed, promulgatedand monitored (there are grave sovereignty issues related to a foreignstandard-setter)?
I think the best thing about IFRS at this point is thatthe conversation has focused the profession and the regulators on the need forglobal quality standards. And while IFRS may not be the best answer, there is aresponse to the need that will come forth if appropriate deliberation and vettingamong all vested parties is accomplished.
-- David Costello, President and CEO, NASBA
A single set of standards will be crucial to worldcommerce as our globe morphs into one overarching super-economy. I believe it'sour leadership responsibility as accounting professionals to drive the effort.I'm disappointed the SEC is distracted and not setting a steady pace. However,I believe the AICPA, FASB, the IASB and our universities are doing acommendable job. The initiative has huge implications on not only the technicalside, but the market dynamics of our profession. The initiative will createsignificant demand for our services, and cause further specialization of ourprofession.
-- Gale Crosley, President, Crosley+Co.
I think a single set of global accounting standards wouldbe very good because it would bring uniformity to an already-confusing set ofstandards. Most companies that rely on CPA services cannot discern thedifferences between U.S. GAAP and global standards. A CPA promoting his or herservices can more easily communicate the one set of standards to clients andprospects, especially if the client does business internationally.
I think is also incumbent on everyone who works in theaccounting profession to take an active role in helping clients and the publicunderstand the single set of standards, instead of relying on larger entitiesto solely communicate the information. Of course, the regulatory organizationswill have to help the accounting professional understand "what" to communicate,but I think everyone should participate in this discussion.
-- Scott H. Cytron, President, Cytron & Co.
I agree that there should be a single set of globalstandards. I am really not in a position to determine the best manner ofaccomplishing this goal.
-- E. Martin Davidoff, Founder and firm manager, E.Martin Davidoff & Associates CPAs
I don't think this is a big issue for the "mom andpop" or "main street" accounting firm. These standards may wellbe appropriate for major players but I don't see the average small practitionerhaving strong feelings about this.
-- Frank Degen, Government relations chair, NAEA
As the activities and interests of investors, lenders andcompanies have become increasingly global, it is crucial for the continuedhealth of our global capital markets that a globally accepted, high-qualityfinancial reporting framework is developed at both a domestic and internationallevel. This is the only way to achieve fair, liquid and efficient capitalmarkets worldwide by providing investors with information that is comparable,transparent and reliable. Given the unique concerns of the U.S. markets andstandard-setters, convergence is the most likely method by which theimplementation of a single set of global accounting standards is likely tooccur.
-- Bob Dias, Vice president of marketing, CCH
I think that this is an important goal, as it creates alevel playing field across continents and markets, which becomes more importantas investors and their advisors look at investing and diversification with amore global view. Knowing that financial information is standardized makes iteasier for investors to make more informed decisions.
-- Michael Di Girolamo, Managing director, InvestmentAdvisors Division, Raymond James Financial Services
I support the creation of a single set of globalaccounting standards -- and truly believe IFRS is way overdue. A single set ofstandards will not only simplify the way companies conduct themselves, butencourage 100 percent adoption of ethical behavior. In addition, any timesomewhat-disparate regulatory bodies can come together for a common cause --even though the rules may be somewhat complicated to follow in the short term-- the public will appreciate the effort because it builds long-term trust anda much stronger economy.
-- Anton Donde, CEO, SpeedTax
A standardized set of global accounting standards isinevitable. I believe that eventually, through convergence, it will happen. Itis just a matter of time. The broader concern is the potential variances basedon size and type of business involved. With this consideration, I believe thatthere will be a difference in the development and implementation of globalstandards.
-- Loretta Doon, CEO, CalCPA,
I think the adoption of unified global accounting andfinancial reporting standards are enormously important. The world isglobalizing -- both firms and their clients need to be able to do businessaround the world -- and with the Internet and globalization, the barrier todoing business internationally is going to keep getting lower and lower. Morethan 100 countries already use IFRS -- firms of all sizes will increasinglyhave clients that are doing business both inside and outside of the UnitedStates and having unified standards will help everyone.
What is equally important is that the standards that weend up with are company-size-appropriate. Public company standards must bedifferent from private company standards. We must be careful to balance theneed for private company stakeholders to get consistent, relevant, transparentand meaningful information while at the same time not introducing an unduecompliance burden for smaller businesses.
-- Daniel Druker, Senior vice president, Intacct Corp.
KPMG continues to support the adoption of a single set ofhigh-quality global accounting standards.
To achieve the objective of a single set of globalaccounting standards will likely require an independent and well-fundedstandard-setting body that, while suitably accountable to the world's capitalmarkets, is insulated from political interference and has an investor focus toits standard-setting activities.
In terms of convergence with international standards herein the United States -- we recognize that by bringing U.S. GAAP and IFRS closertogether, convergence will make a U.S. transition to IFRS adoption easier.
Therefore, we support the IASB's and FASB's commitment toredouble their effort to complete the major convergence projects in 2011, andthereby provide a sound basis for a decision by the SEC about whether, when andhow to incorporate IFRS into the U.S. financial reporting environment.
In addition, we believe that financial markets regulatorsin jurisdictions with significant capital markets, such as the U.S. SEC, theCommission of the European Union and the Japanese FSA, among others, can playan important role in the convergence of national and international accountingstandards by overseeing standard-setting activities globally.
KPMG International member firms have assisted more than1,400 clients around the world in their IFRS conversions. Our experience hastaught us that it is important for preparers and auditors to discuss theapplication of standards across borders and seek common solutions toapplication issues, as doing so can lead to increased comparability infinancial reporting from one capital market to another.
There's no doubt that this is challenging -- both withina global network like KPMG's and more broadly across the profession -- but it'sclearly the path we need to pursue to facilitate more efficient allocation ofcapital resources around the globe.
-- Timothy Flynn, Global chairman, KPMG
IFRS has become the international accounting standard,with more than 100 countries having already adopted or in the process of adoptingit. That total includes all of the world's most developed economies with theexception of the United States.
Accordingly, I welcomed the SEC's announcement inFebruary reiterating its support for a single set of high-quality globalaccounting standards, and its support of IFRS as that single set of standards.I am on the record in support of U.S. adoption of IFRS, as there are manybenefits to American investors and the markets. Such benefits includefacilitating more efficient capital allocations by both companies andinvestors, promoting increased transparency of financial information given theprinciples-based nature of IFRS, reduced costs for companies (especially thoseoperating in multiple jurisdictions), as well as protecting the long-term capitalmarket competitiveness of U.S. capital markets.
The Center for Audit Quality is committed to working withthe SEC as it carries out its work plan, as well as collaborating with otherstakeholders to encourage engagement. As such, we are continuing our efforts toeducate capital market stakeholders, including investors, to understand thebenefits of IFRS.
-- Cynthia Fornelli, Executive director, Center for AuditQuality
Arriving at a single set of accounting standards isimperative; inconsistency breeds uncertainty, which in turn discouragesinvestment and business activity.
The most obvious approach is to adopt IFRS -- after all,it's just U.S. GAAP against the rest of the world, at the moment. We would thenwork within the IFRS structure to get change. While IFRS is not perfect, it'sbetter than the current uncertain standoff.
-- Christian Frederiksen, Chairman, The 2020 Group
As capital markets become increasingly global, U.S.investors have a corresponding increase in international investmentopportunities. In this environment, I believe U.S. investors would benefit froman enhanced ability to compare financial information of U.S. companies withthat of non-U.S. companies. The Securities and Exchange Commission has longexpressed its support for a single set of high-quality global accountingstandards as an important means of enhancing this comparability. Therefore,International Financial Reporting Standards will potentially provide the bestcommon platform on which companies can report and investors can comparefinancial information.
-- J. Russell George, Treasury Inspector General for TaxAdministration
The ultimate goal of having a single global standard forpreparation and presentation of financial statements is certainly a netpositive, but I have some concerns about the transition:
-- Trickling change may require that accountingdepartments are dealing with some major change in the accounting rulesconstantly over the next several years (e.g., ratification of EITF 08-01 infall of 2009 followed by new joint FASB/IASB exposure draft on revenuerecognition in summer of 2010).
-- We may see a temporary divergence of practice as eachcompany and each major accounting firm adopts and applies each change in theabsence of a volume of authoritative literature. This will create an uncertainenvironment both for preparers and consumers of financial statements.
-- Ron Gill, CFO, NetSuite Inc.
The idea of a single set of global accounting standardsis nice, especially as business today isn't and shouldn't be limited bygeographic boundaries. And more principles-based than rules-based is probablygood. But standards imposed by regulatory authorities for comparability aren'tall that helpful to stakeholders as would be, say, reporting that meets thetrue needs of these stakeholders: assurance of accuracy and relevance specificto the purpose. With something as complex as accounting, judgments are almostalways necessary and exceptions seem to be the rule (captured minimally, atpresent, in footnotes). An approach that clarifies the judgments applied andassures transparency of the judgment process is, in my humble opinion, the moreimportant objective. Does IFRS accomplish this any better than GAAP does?
-- Michelle Golden, Founder, Golden Practices blog
The ability to compare corporate finances on a consistentbasis using the IFRS standards makes sense, particularly for companies withglobal operations. IFRS will drive consistent standards of measurement acrossnational borders.
But IFRS is principles-based compared to the rules-basedapproach of GAAP. For U.S.-based companies, the experiences of Enron, WorldComand others raise serious questions about the wisdom of leaving the auditprocess to the discretion and interpretation of the auditors, as IFRS would do,rather than more tightly dictating audit procedures, as GAAP currently does.Certainly the SEC and the investing community will have difficulty switchingfrom GAAP, even as the need for more disclosure and tighter scrutiny increases.
For these reasons, I believe that the best approachshould be through a convergence of the two systems.
-- Jeff Gramlich, President, CCH Small Firm Services
The biggest advantage will be consistent reportingworldwide. The biggest disadvantage will be the additional cost of change inaccounting to one standard reporting system and the impact on income for theperiod of change.
-- Larry Gray, Government liaison, NATP
There is a natural challenge in bringing so manyeconomies (with varying levels of sophistication) together. However,globalization is no longer just a catchphrase, it is the norm. With companiesroutinely having operations in multiple countries, it is even challenging todefine what is a "foreign" or "domestic" organization. Forthe users of information, despite the great challenge to those preparers, it iskey that financial data be as consistent as possible. I think it is a bit earlyto determine whether the current initiatives are on track, but I do stronglybelieve they must continue to be pursued.
-- Calvin Harris, National president and CEO, NABA
It is the right approach, as we live in a global and veryconnected, interdependent world. The approach should add the words"high-quality" to the single set of accounting standards. The privatecompany standards (IFRS for SMEs) are being adopted in other countries withchanges that almost nullify the advantages of converging. The worst thing thatcould happen is adopting the single set and adding "dialects" allover the world, making it even more confusing than it already is.
The current convergence project of the FASB-IASB has mevery concerned because of the extremely short timeframe and magnitude of thechanges being dealt with. This needs to be reconsidered in a way that can allowproper input from stakeholders and an implementation timeline that giveseveryone time to get the necessary training and systems changes that will beneeded to deal with the significant changes being proposed.
-- Tom Hood, CEO and executive director, MACPA
I think that the Memorandom of Understanding is working.It appears to me as if FASB as well as the IASB are sincerely trying to achieveconvergence under its precepts. At the same time, as their work progresses,significant and, in some cases, possibly irreconcilable differences, are beingunearthed. Lease accounting might be an example. Thus, the schedule forconvergence is sliding.
Again, I would like to support the concept of movingtowards principles-based as opposed to rules-based accounting. However, I amsomewhat cynical about human nature and its ability to rationalize. If anaccountant is not principled, then principles-based accounting will notfunction. Also, I feel that the litigious nature of the U.S. culture hascreated a need for rules-based accounting, which should be easier to defend.
Ultimately, I want convergence to continue. It willfacilitate international trade and investment. However, I do not feel that IFRSshould be adopted in toto if it means that the U.S. will no longer have many ofthe rules that it has developed and that have been tested over time.
-- Andrew L. Hult, President, NCCPAP
I believe that it's more pressing that we devote ourlimited time and resources toward supporting the recovery of our economy.
-- Trey James, CEO and co-founder, Xcentric
A single set of global accounting standards is aneventuality, whether through convergence or IFRS. As the world becomes evenmore connected, one set of standards is a requirement in order for investors tohave consistent information. Given the complexity of transactions and theinterconnection of economies and investments, one set of global standards isessential. It is no longer a question of if, but when. Unfortunately, the whenbecomes the bigger question. Since there are numerous organizations,individuals, governments, etc. that have a stake in what the ultimate globalstandards will look like, we will continue to see much dialogue and debatearound this topic for some time before we get to the final state.
-- Gregory Johnson, Executive director and COO, NABA
IFRS will be disruptive in the short term, and will causemore work for auditors and accountants as they try to understand thedifferences. Many software products already support IFRS, and will help withthe transition. IFRS looks at many items differently, not necessarily correctlyor incorrectly. Having a single global standard should make globalization fromthe U.S. into other geographies easier. IFRS is not as big of a threat to theU.S. from other countries nor as big of a threat as some in the accountingprofession believe it is.
-- Randy Johnston, Executive vice president and partner,K2 Enterprises
I'm generally supportive of the creation of globalaccounting standards, although there are critical transitional and educationalneeds that flow from potential changes. From a tax perspective, the tax policyramifications of the major issues presented by the replacement of GAAP by IFRSmust be analyzed. Examples of issues include:
-- E&P rules, use of U.S. GAAP
-- Transfer pricing
-- Inventory issues, especially impacts on LIFO and lowerof cost or market
-- Revenue recognition
-- Change of accounting methods
-- FIN 48
-- IRS educational and training needs
-- Edward S. Karl, Vice president of taxation, AICPA
I believe that practitioners, from all size firms, shouldbe more open and proactive relating to IFRS. The smaller firms (most of theAICPA membership) often don't see that it could possibly relate to them andtheir clients. I am hopeful that continual progress will be made.
-- Rita A. Keller, President, Keller Advisors
I think there needs to be a single set of globalaccounting standards. They only question remaining is when. My guess is we'llsee adoption of IFRS worldwide in the next three to five years. Moreimportantly, I believe this could be the next "Sarbanes-Oxley," interms of creating additional revenue for the accounting profession andresurgence similar to what we experienced during the pre-recession boom.
-- Allan Koltin, President & CEO, PDI Global Inc.
It's imperative that we have one set of global accountingstandards to facilitate investment and capital flow on a worldwide basis.Personally, I support the adoption of unified international financial reportingstandards.
-- Kenneth Koskay, Senior vice president and generalmanager of certification, Tax & Accounting business of Thomson Reuters
Creating a single set of standards and the implementationof IFRS aren't a pursuit created by any one body as much as the necessity ofthe business world pushing to a global environment. I remember practicing inBuffalo just seven years ago and hearing of small-business clients selling toforeign entities. The need for a single set of accounting standards was realthen and will continue as businesses continue to buy/sell their operationsglobally, expand operations globally, buy products globally and sell theirproducts globally. Without one set of standards, how do you possibly comparethe financial viability of a company in China to Canada to the U.S.?
The SEC needs to set a date for the U.S. convergence toIFRS for the benefit of the U.S. publicly traded companies to be viableglobally, which will push the private sector down a similar path.
-- Mark J. Koziel, Director, specialized communities,firm practice management, AICPA
The creation of a single set of globally accepted,high-quality accounting standards is in the best interest of the capitalmarkets in the United States and the rest of the world. However, this"single set" of standards needs to be responsive to the needs ofentities and the users of their financial statements. For this reason, webelieve that the IFRS framework, which includes a full set of standards forentities with public accountability and Small and Medium-Sized Entities,provides the best option for capital markets in the U.S. and our clients.
The decision to make a wholesale change in accountingstandards from U.S. GAAP to IFRS is understandably complex and can beemotional. While a potential change to IFRS through a process of convergencewith U.S. GAAP may not be the most efficient path, it is important to theprocess in the United States because a decision to adopt the IFRS frameworkwould likely not be possible without it. In addition, the convergence processwill also lead to the creation of several improved accounting standards thatwould not have been developed as quickly, if at all, without the convergenceprocess. These improved standards will be a benefit to both entities andfinancial statement users in the future
-- Gordon Krater, Managing partner, Plante & Moran
I think the last two years have taught all of us theimportance of transparency when it comes to business. The language of businessis accounting and as such, one standard would go a long way to creating moretransparency among multinationals, investors and individuals. Whether we likeit or not, the world economy is consolidating. The increasing role of Europe,China and India will force that convergence. Having one standard for accountingwill help accelerate that and will protect all of our interests.
-- Rene Lacerte, Founder and CEO, Bill.com
For the benefit of investors, who invest worldwide, it iscritical that U.S. accounting standards be harmonized with IFRS. The currentapproach, overseen by the SEC, seems to be the most efficient and effectiveprocess, although not without its problems.
-- Charles E. Landes, Vice president, ProfessionalAssurance Standards and Services Group, AICPA
Not being a CPA, my technical knowledge on this subjectis limited. From a layman's philosophical view, I think the idea of consistentglobal accounting standards is a worthy and perhaps necessary goal in aneconomy that is unquestionably global in its nature. The ability for capital toflow freely throughout the world is an important requisite to sustain globalgrowth. It is vital for investors to have confidence in financial informationto stimulate that capital flow. Whether this goal can be reached from apractical standpoint without causing severe disruption to financial markets isa concern that I suspect can be addressed but may impact the timing of theeffort. Given the current tenuous state of many markets around the world, thismay not be the most opportune time to implement this initiative.
-- Mont Levy, CEO and principal, BAM Advisor Services
A global set of standards is great for multinationalcompanies and public companies. There should be a different set of standardsfor private U.S. companies
-- Taylor Macdonald, Vice president, Intacct
I believe the global nature of the worlds' economies in2010 makes a compelling case for the benefits of IFRS. Capital markets areintrinsically linked through not only public traded companies, but sovereignactivities. As the world embraces like-standards, the capital markets will becomeincreasingly transparent and beneficial to the investor community.
-- Teresa Mackintosh, General manager and senior vicepresident, Workflow & Service Solutions, Americas - Professional, Tax &Accounting business of Thomson Reuters
The AICPA may be based in the United States, but ourvision encompasses the entire world. Many of our members contend withinternational business issues. As their organization, we have to respond totheir needs and guide them.
The institute supports one set of global accounting andhas for years. We certainly believe it will happen and are taking theappropriate steps to ensure that our country's CPAs are appropriately prepared.Through our educational and communications efforts and research, such aswww.ifrs.com and IFRS readiness surveys, we are setting the stage in theprofession for the inevitable adoption of international standards.
-- Janice M. Maiman, Vice president of communications andmedia channels, AICPA
I prefer evolution over revolution. I see the advantagesof one set of globally accepted accounting standards, but I would like to makesure that it doesn't put the U.S. at a competitive disadvantage. If in our bestinterests and where possible, we should continue with the efforts to convergestandards -- where not, let's hold our ground.
-- Eric Majchrzak, Marketing and communications director,Freed Maxick & Battaglia
As our capital markets are increasingly global, it'simportant we ultimately have a single set of high-quality global accounting forpublic companies and companies with cross-border reporting. I support the pathFASB and the IASB are taking to that goal, through convergence to eliminate thedifferences between U.S. GAAP and IFRS.
-- Krista M. McMasters, CEO, Clifton Gunderson
The importance of global accounting standards cannot beoverestimated. As the nature of how we do business has evolved, so must ourmethods of financial reporting. Commerce no longer knows borders. Internationalclientele transcends the largest accounting firms, and many smaller firms havea presence on the international business landscape. More than 100 countrieseither already use or allow the use of IFRS, and this number will grow in theyears ahead.
The AICPA has been a proponent of one set of accountingstandards for years and is working diligently to bring the U.S. accountingprofession up to speed on IFRS. We work closely with the SEC and have advocatedfor a date certain to begin implementing IFRS. Through our Financial ReportingExecutive Committee, formerly the Accounting Standards Executive Committee, theAICPA provides thought leadership to the International Accounting StandardsBoard. An example of our commitment to IFRS is that we will soon introduce itin the Uniform CPA Exam.
While the AICPA supports IFRS, we also support a separateset of accounting standards for private companies that are relevant for usersof private standards.
-- Barry Melancon, President and CEO, AICPA
For public companies - yes. It's clear from the recentrecession that we are dependent on each other globally. They are also neededfor a global generation of new investment capital.
-- James C. Metzler, Vice president of small firminterests, AICPA
Global accounting standards will benefit both companiesand investors, and should be pursued. They will make it easier to compete andinvest in an increasingly global economy.
Convergence of GAAP and IFRS is the preferred approachover simple IFRS adoption. Retaining some aspects of GAAP in the globalstandards will help preserve the quality and relevant detail of financialreporting in the U.S. It also will help minimize the costs to companies makingthe transition.
-- D. Scott Moore, President, Association for AccountingMarketing
I believe that the goal to create a single set of globalaccounting standards is an important one. It makes more sense in my mind toadopt a single standard (i.e., IFRS) as opposed to converging two separate setsof rules because the convergence exercise appears to be a case of trying to fita square peg into a round hole. One only need to look at the debate over fairvalue to see that the IASB and FASB have very different ideas of what such astandard should be. If IFRS was the standard, differences could be reconciledby the body that set those standards and a final proposal could be issued,input could be solicited and a final standard could be put forth.
To answer the question, "Should they be pursueddifferently?" -- it appears, from a practical standpoint, that the shiphas already sailed. The SEC has decided to wait until more information can becompiled with regard to what impact there would be in the U.S. market.Meanwhile FASB and the IASB have engaged in an ambitious campaign to converge-- or at least attempt to converge -- their standards.
Since some people involved (e.g., Sir David Tweedie,Michel Barnier) insist that the United States' involvement is paramount, theprocess could have been simpler if the SEC determined how it felt about IFRSand how it would affect the U.S., then communicated its approval or concerns.Since the SEC has the final say as to what accounting standards must befollowed in order to have access to capital in the U.S. markets, everythingthat happens up until that point hangs in the balance of the commission's finaldecision.
-- Caleb Newquist, Founding editor, Going Concern
It is my opinion that a single set of global standards iscritical to practitioners in the next millennium. As we all know, the worldkeeps "growing" smaller and this is an initiative critical to myclients as they think globally. Yes, I am a strong proponent.
-- Jay N. Nisberg, President, Jay Nisberg &Associates
Getting to a single set of global accounting standards isgoing to be net plus in an era of globalization. But on the other hand, itplaces a huge amount of pressure on finance departments -- many of whom arestill wrestling with other pressing financial reporting demands, such as someof biggest revenue recognition changes in years -- with the advent of EITF08-01 and EITF 09-03 passed by FASB just last fall. Some businesses we speak toare still struggling to comply with Sarbanes-Oxley, because of limitations intheir business processes and software systems. What's clear to us is thatbusinesses, especially global ones, that have a mishmash of Stone Age ERPsystems, multiple instances, and manual integrations are going to have a verypainful time meeting these new standards -- and are going to be at adisadvantage. The big advantage for our customers is that because they'rerunning on NetSuite's cloud financials, whether it's a single entity or amulti-sub, we can roll out upgrades to support the latest financial standardsto them automatically, just as we did with supporting EITF 08-01 and 09-03 --and let them focus on running their businesses instead.
-- Zach Nelson, President and CEO, NetSuite
A single set of global accounting standards is a verygood idea for global businesses. The ability for financial statement users andstakeholders to have a common approach allows them to compare the relativeperformance of global companies and to use a common framework for globalcapital market financing arrangements. The benefits for smaller businesses areless clear. Because many SMBs don't operate globally and many are not publiclytraded, we don't see an immediate benefit for them transitioning from GAAP toIFRS.
As with any topic as complex as global accounting rules,there is no single answer "that fits all" businesses; this meansthere will be some businesses that may elect to use the less complex IFRSmethod than the GAAP method of accounting. For example, a newly formed businessmight consider using IFRS, rather than GAAP, especially if internationalbusiness transactions are possibilities for the future. Also, because thecredit market in the U.S. is a significant source for capital, it will also benecessary for investors/creditors to become familiar with non-GAAP methods.
GAAP in the United States is "rules-based,"while the IFRS approach is "principles-based;" these approaches aresteeped in history, and adopting any change will be a transformational set ofevents for global businesses.
It's our belief that a worldwide adoption of IFRS ispreferred with the caveat that country uniqueness be preserved. Some countries,such as the U.K., have adapted IFRS to address unique issues of that country.We believe a similar approach will occur in the U.S., as the SEC is definitelyfocused on transitioning to global accounting convergence, an approach we thinkwill be beneficial for U.S.-based companies. Likewise, we see the benefit ofthe flexibility provided for U.S.-based SMBs, which is that an SMB may elect touse either GAAP or IFRS.
-- Jodi Uecker-Rust, President, Sage Business Solutions
The world continues to shrink as businesses of all typespursue opportunities in international markets. For businesses seeking diversesources of capital to expand, the nuances of the U.S. financial reportingenvironment can slow this process. Because it provides a high-quality,principles-based platform while retaining transparency, reducing complexity andencouraging use of professional judgment, much of the world uses IFRS as acommonly accepted standard.
I believe that American adoption of IFRS is not aquestion of "if" but "when." According to sources at theAICPA and at some of the nation's largest public accounting firms, IFRS couldreplace GAAP in five years in the U.S. The Securities and Exchange Commissiontook the first step in advocating adoption by issuing a concept released inAugust 2007, "On Allowing U.S. Issuers to Prepare Financial Statements inAccordance with IFRS." Nine months later, then SEC Chairman ChristopherCox reiterated his support of the SEC's IFRS position in his speech to theInternational Organization of Securities Commissioners.
Is the accounting profession ready? It is certainly goingto be a challenge to move from the current rules-based system to a moreprinciples-based system of accounting. It will require a change in culture, andmany are also concerned about how it will affect the profession from aliability standpoint. However, the industry can quickly acclimate itself to thenew standards through commitment to the process and education on the standardsand practice application. This industry's intelligent professionals can readilytransform themselves when they see the need and make the commitment to change.I have no doubt that the industry will embrace the new standards, and can beinstrumental in helping clients make the transition. Just as consulting andfinancial planning services grew from traditional accounting practices byidentifying a client need and providing solutions to satisfy the need, thosewho are best able to acclimate will reposition themselves as adding value tothe relationship and will be rewarded for their efforts. Those who are unableto make the transition will be left behind. Change represents opportunity forthose who are willing to make it.
-- Roger Carlton Ochs, President, H.D. Vest Inc.
I think U.S. GAAP will get close but not identical toIFRS -- both boards have been working diligently to close the gap. In thisglobal economy there is a need for a common accounting language. However, thereare many business cultural differences among the countries of the world and Idon't think there will be many countries who will adopt IFRS intact. Thequestion becomes what will the SEC decide for U.S. public companies and willthey cede standard-setting to London?
-- Judith O'Dell, Chair, FASB Private Companies FinancialReporting Committee
This is realistically a matter of "when" asopposed to a matter of "if." The question is who will be the drivingforce in setting the global standards. Up until recently, I think most peopleassumed that the U.S. would take the lead here, but given the current economicclimate and the fact that other countries are openly challenging U.S.dominance, this is now less certain.
-- Jeffrey S. Pawlow, CEO and managing shareholder, TheGrowth Partnership
As more and more businesses expand beyond theirtraditional borders, the need for a common set of global accounting standardshas become increasingly apparent. The inefficiencies inherent in keepingabreast of multiple standards and regulations, maintaining multiple sets ofaccounts and reconciling those accounts monthly, quarterly and annually forreporting purposes puts a tremendous burden on businesses, especially in thesetimes of increased transparency.
At the same time, we must be cognizant of the cost andcomplexity of such sweeping changes. The current approach, where the opinionsof accounting professionals most directly affected by such a change isconsidered, should be key to a methodical and deliberate implementation of newglobal standards.
-- Brian Peccarelli, President, Workflow & ServiceSolutions, Tax & Accounting, The Tax & Accounting business of ThomsonReuters
A common set of standards that can be used globally is agoal to which our organization is committed and continues to work toward. TheU.S. financial reporting system/constituents need to collectively determine thebest path forward to ensure the protection of U.S. investors and thetransparency of U.S. capital markets.
-- Teresa S. Polley, President, Financial AccountingFoundation
Business is becoming global and global differences instandards can make it difficult to compete and operate. The move to a singleset of standards only makes sense as global borders become less meaningful.
-- J. Clarke Price, President and CEO, Ohio Society ofCPAs
Globalization is the major issue in determining thefuture of financial reporting. As the financial markets become more and moreglobal, the need for a global set of accounting standards to make possibleglobal transactions and reporting has really become a necessity. In addition,investors want an environment where they can evaluate and compare firms acrossnational boundaries. The International Accounting Standards Board is marchingto pull together one set of global standards and the U.S. Financial AccountingStandards Board is agreeing to converge U.S. standards with internationalstandards. The rollout of the standards will take years, and the adoption evenlonger, but globalization will have been the major force in determining theoutcome. The current economic crisis has uncovered the interdependent characterof global business, and financial and capital markets, making the need forglobal accounting standards more evident.
-- Robert Reid, CEO, Intacct
As a leader in the accounting profession, I believe thecurrent attempts have been met with the best intentions, but due to thecomplexity of the core issues, it can appear to be confusing and cause concernwith many constituencies. I believe the proposed changes should continue to bepursued and I hope that the key groups and leaders from the profession can havemore opportunities for dialogue. The profession is quite diverse andpractitioners from small business to large organizations need to understand howa dramatic change in standards will affect them. It is a great time for leadersto come together and focus on communication and consensus building thatparallels technical discussions.
-- Sandra B. Richtermeyer, Global chair, Institute ofManagement Accountants
This is obviously a highly debated issue, and it willcontinue to be long after any convergence or conversion actually happens. Thereare big differences between U.S. GAAP and those standards set by the IASB, andthe transition will likely be very complex and very challenging for many.However, at the end of the day we need to realize that our transition to aglobal economy is not going to stop, and the accounting world needs to adapt asthis happens. If we can pull this off successfully, we will have taken a bigleap forward toward the development of more consistent financial statementsthat can better support global investment, decision-making and operationswithout the need for the complex translations and analysis we're faced withtoday.
-- Kevin Robert, CEO, Wolters Kluwer Tax & Accounting
As a CPA, philosophically I believe there should be asingle and consistently applied set of global accounting standards. The U.S.adoption of the IFRS is inevitable and a timetable should be established.Convergence of GAAP standards to IFRS standards will not result in a uniformmethodology. Procrastination through convergence of methodologies will prove tobe more costly.
-- Michael Rosedale, President and founder,CPADirectory.com
I have long been a proponent of the free market system ona worldwide basis. For this to function optimally, all countries need to followthe same standards. So I strongly support convergence of IFRS worldwide.
-- Marc Rosenberg, President, The Rosenberg Associates
With the world operating on a global basis, the adoptionof IFRS is important. However, we cannot have two sets of standards; one forglobal and another for companies not operating globally.
-- Frank K. Ross, Director, Center for AccountingEducation, Howard University
As the economy becomes global, standards must align.
-- Rebecca Ryan, Founder, Next Generation Consulting
While IFRS was developed as an effort to provide afinancial reporting standard for less-developed countries that lacked standardsof their own, there has been a general recognition that the world economy wouldbe well served by having one universal financial reporting standard thatapplied everywhere. Many of our developed trading partners have already movedtoward adopting IFRS, so a move in that direction seems inevitable. The SEC hasin fact endorsed such a move. An issue is that IFRS is not as sophisticated astandard as U.S. GAAP and there are a number of differences in approach.Convergence seems, therefore, to be the logical approach so that, when the U.S.does adopt IFRS, it might be different from GAAP, but it will, in most ways, beas robust as GAAP in terms of protecting the interests of the users offinancial statements.
-- Mike Sabbatis, President and CEO, CCH, a WoltersKluwer business, North America
In today's global economy, it only makes sense toimplement global accounting standards. However, I believe there should be twosets of standards, one for public companies and one for privately heldcompanies. Privately held companies should not be held to the same standards asare public companies.
-- Frank Schettino, Managing partner, Anchin, Block &Anchin
I believe the current attempts to create a singlestandard (the adoption of IFRS) are positive because the world does need asingle standard in order to foster more competition, although I am aware thatinitially costs increase as a result of the transition to one standard. So, Iagree with the pursuit of a single standard. The only change I would suggest isthat the process be expedited in order to get to the single standard morequickly.
-- Mark Schlageter, President, Business Compliance &Knowledge Solutions, the Tax & Accounting business of Thomson Reuters
With the SEC's approval a few months ago of a newtimeline for possible adoption of IFRS, it appears that IFRS is back on trackfor future adoption at some point in the foreseeable future. The SEC set 2015as the earliest possible date for adoption. While a move to IFRS will initiallyaffect only public companies, over time these standards would become fairlywidespread. All CPAs will need to stay tuned on this subject, not just thosewho audit public companies. Educators and students will also be affected, asthe CPA Exam is moving to begin testing on IFRS in 2011. Our education systemwill need to adapt to IFRS.
Moving to IFRS is just part of the overall trend toward aglobal economy driven primarily by significant changes in technology,capitalism and world trade. Having a set of accounting standards that isuniform and used across the globe certainly fits with the world in which we nowlive. Thomas Friedman's book, "The World is Flat," covers this trendrather well. The recent banking/financial crisis also demonstrates how oureconomic and financial systems are intertwined around the globe.
I am sure not everyone will be supportive or happy aboutthis development. Some in the profession have real and legitimate concernsabout the quality of IFRS and how they compare to GAAP. There are also issuesrelated to the funding and independence of the IASB, the cost to businesses toimplement this change, how "principles-based" standards like IFRSwill fare in the U.S. legal system when CPAs are sued, and giving up U.S.regulatory control/oversight to an international board. The SEC is looking atall those issues, so I don't think they will move to adoption unless they aresatisfied those concerns can be overcome or mitigated. But when all is said anddone, it appears that a move to IFRS is inevitable. Eventually, the argumentsagainst it will fall under the weight of the logic behind it. Thomas Friedmannoted in his book: "The historical debate is over. The answer is freemarket capitalism." I think it is just a matter of time that the debateover IFRS will also be settled, and I think the answer is -- we are goingglobal.
-- John M. Sharbaugh, CEO and executive director, TexasSociety of CPAs
I absolutely believe that creating a global set ofaccounting standards should be pursued, and, in fact, has to be pursued. Therecent financial crisis is a good example of how financially intertwined theworld is, and the danger of having various reporting standards adding toconfusion during troubled times.
Our firm is a Chicago-based CPA firm operating entirelyin the Midwest. Yet we are doing quite a lot of consulting internationally (wehave both clients based in other countries and clients based in the U.S. withforeign operations). We see the confusion caused by different reportingstandards. I have been personally involved in consulting for a U.K.-basedcompany (reporting under IFRS) who owns a U.S.-based subsidiary (reportingunder U.S. GAAP). No being well-versed in IFRS, I found it very difficult toeven understand the U.K. audited financial statements.
It appears that many if not most industrialized nationsother than the U.S. have already have adopted IFRS (EU, Japan, India, etc) andmany believe that IFRS is the most viable solution. I personally would preferto see a convergence of U.S. GAAP and IFRS but I am probably prejudiced towardsGAAP.
Having said all that, I do believe this will be a verydifficult task and will not happen any time soon. Determining exactly whichbody or bodies should be responsible for determining accounting standards,transitioning from GAAP to IFRS in the U.S. and other non-IFRS countries, etc.,is an almost insurmountable task. But as the world shrinks, it absolutely musthappen.
-- James Sikich, CEO and managing partner, Sikich LLP
I think mass standardization efforts arewell-intentioned, but misguided. The efforts lead us in opposite directions.First, they require lowest common denominator thinking, while at the same timethey lead to mass complication of even the simplest concepts.
-- Douglas Sleeter, Founder and president, The SleeterGroup
As we move to a global economy, we are in support ofstandards that make financial statements comparable across borders. It isimportant to note that there are differences in accounting standards for trulysmall businesses versus large businesses. We urge the standards-making boardsto take this into consideration. In my opinion, the SEC, the AICPA, CPAsocieties, and other organizations will certainly have to take awell-thought-out approach to help companies and the accounting profession getup to speed.
-- Brad Smith, President and CEO, Intuit
I think, in the long run, it's needed. But I do feel thatgoing from a rules-based approach to a principles-based approach is the wrongpath.
-- Jeffrey D. Solomon, Chairman, Massachusetts Society ofCPAs
The SEC, from the perspective of global competition forcapital, ultimately needs to make sure that our markets are on a level playingfield with others around the world. That means we will probably need to adoptIFRS for public companies in the U.S. Investors making a decision about whetherto invest in companies listed on U.S. exchanges or those abroad need to be ableto compare apples and oranges. However, the needs of users of financialstatements of our thousands of private companies are in many cases different.Many of these entities are not competing for international capital and domesticusers are accustomed to U.S. standards. The blue-ribbon panel studying thisissue will consider those needs and recommend the appropriate solution.
-- Neal D. Spencer, CEO, BKD
Global accounting standards are being used throughout theworld. More than 100 countries either allow or mandate the use of InternationalFinancial Reporting Standards. The European Union adopted IFRS for publiccompanies in 2005. Canada, India and Korea are adopting IFRS for publiccompanies in 2011, and more are already scheduled in the years to come. Globalstandard are present and are here to stay.
The AICPA has supported the concept of global standardsfor many years. We have worked with our constituent members and the SEC. Wehave been advocates for a date certain to start the implementation process ofIFRS. Education is a critical part of this process, and we have participated inthis endeavor with our CPA members, universities, the investing public, andusers of financial statements. IFRS will be introduced on the Uniform CPA Examin 2011, and the education process is already in place. Alternatives forprivate company financial reporting standards are being examined and evaluatedto best serve the needs of the public.
-- Paul V. Stahlin, Chairman, AICPA
Capital markets are global, and so a single set ofhigh-quality standards for public companies would produce many benefits. TheAICPA has long advocated convergence and holds a leadership position ineducating the United States about IFRS. Our Web site, www.ifrs.com, is avirtual reference book on the subject. It is key to me that CPAs in the U.S.have the opportunity for an orderly transition to IFRS. In the near term, weare introducing an IFRS certificate, which will indicate that the CPA holderhas had at least 70 hours of education. The importance of understanding bothU.S. GAAP and IFRS is increasing as our world becomes more global. Beginning in2011, questions on IFRS are eligible for inclusion on the Uniform CPAExamination.
-- Arleen Thomas, Senior vice president of membercompetency and development, AICPA
I believe the current attempts to create a single set ofglobal accounting standards has been quite confusing to the public and to theprofession. FASB's inability to address in a timely fashion issues surroundingcreation of global accounting standards has led to confusion. At the end of theday, I think crafting a single set of global accounting standards whichprovides flexibility for non-publicly traded companies and nonprofitorganizations is needed. The IASB, FASB and the SEC need to work morecollaboratively to advance this initiative, get it on track and define a datefor mandatory adoption.
-- Ralph Thomas, Executive director, NJSCPA
Having worked at a global telecom multinational companyfor more than 20 years, and now at the Institute of Management Accountants,which has members in more than 100 countries, I certainly appreciate andsupport the value of a globally consistent language for financial transactions,information exchange, and investor analysis. Have we addressed some toughquestions head-on, though, such as - in the U.S., have we considered,seriously, the need for a "professional judgment framework," givenour litigious and unforgiving nature?
-- Jeffrey C. Thomson, President and CEO, IMA
I believe that there should be a single set ofhigh-quality accounting standards used by all public companies around theworld, and that substantial efforts should be expended to ensure adoption andconsistent application of such standards.
A single set of global accounting standards wouldfacilitate efficient capital allocation decisions by simplifying comparisonsamong global investment opportunities. It also has the potential to result in ahigher level of investor understanding and confidence, and thus a reduction inthe overall cost of capital. As investors search for and find opportunities todiversify their portfolios with holdings from a range of countries, they needto have the ability to compare financial reports from various countries, and,more important, have confidence in financial reporting worldwide.
The only set of standards that could be accepted globallyare the International Financial Reporting Standards issued by the IASB.
In the effort to gain universal adoption of IFRS, theconvergence process alone is not sufficient. All countries, including the U.S.,should ultimately commit to adopting IFRS. The financial crisis demonstratedthe importance of a converged approach. If countries, including the U.S., donot make a commitment and set a date certain for adopting IFRS, we willcontinue to see companies play regulatory arbitrage, risking "a race tothe bottom."
This does not mean that IFRS cannot be improved. Ernst& Young comments now and will continue to comment on IFRS, just likepreparers, users and policy-makers do. Accounting standards are always goingthrough continuous improvements. That's why a thorough due process consultationwith fully engaged stakeholders is so important; it helps ensure that standardswill continue to be reflect the needs of all concerned groups.
-- James S. Turley, Global chairman and CEO, Ernst &Young
As the transition to IFRS is accepted by countries acrossthe globe, it is becoming an expectation that some form of IFRS adoption orconvergence is a "cost of entry" for countries that want to competein the global market. The ongoing input and guidance from the U.S. SEC,investors, regulators, accountants and accounting organizations (such as theAICPA) as well as others, ensure that every impact of IFRS on the U.S., whetherthrough adoption or convergence, is considered. If you spend time lookingthrough the SEC's Work Plan, it really does instill confidence that all the"fine print" effects are considered, which is re-assuring (andcritical) from my perspective.
In regards to whether it should be pursued differently ornot, I have thoughts in two areas: variance in levels of implementation andimplementation timelines. IFRS at the global level presents a significantvariance on how countries plan to adopt it (some countries leaning towardsconvergence, some towards complete adoption) and the timelines forimplementation. There are a number of benefits of IFRS that will be lost if thetimelines around global implementation are stretched out too far. In 2011 wecan expect to see a recommendation from the SEC on whether or not toincorporate IFRS into the U.S. financial reporting system, and with 2011 rightaround the corner, I feel as though the U.S. is keeping pace with the rest ofthe globe.
Perhaps convergence is the path to full IFRS adoption? Atthis point, there is widespread support towards a single set of globalaccounting standards, but what varies widely is how people believe we shouldget there. This is a relatively slow-moving project and has huge, globalimpact, and I feel that the current way it is being pursued is acceptable:carefully weighing all impact to all stakeholders, both positive and negative,before changed is pushed down. This is one decision that needs a great deal oftime and consideration, and I feel that it is being given to it at this point.
-- Jennifer Warawa, Senior director of partner programs,Sage North America
As we move to a global economy, we are in support ofstandards that make financial statements comparable across borders. It isimportant to note that there are differences in accounting standards for trulysmall businesses versus large businesses. We urge the standards-making boardsto take this into consideration. In my opinion, the SEC, the AICPA, CPAsocieties, and other organizations will certainly have to take awell-thought-out approach to help companies and the accounting profession getup to speed.
-- Jill Ward, Senior vice president, Intuit
While national pride may be humbled in some countries, itis very desirable to have one set of financial reporting standards worldwide.Of the largest 100 economies in the world, over 50 of them are internationalcorporations. Standardizing reporting will help investors and regulatory bodiesto understand the finances much better. However, I don't believe in having oneset of IFRS, then allowing certain countries to make their own iterations.
-- Troy Waugh, CEO, FiveStar3
While significant challenges remain, the potential forone single global language of accounting is a goal that we should strive for.That global language is IFRS. It is fundamentally important for the enhancedoperation of capital markets in the medium to long term that we achieve thisgoal, which I believe will result in greater efficiency and lower costs ofcapital as a result of the greater transparency and comparability in thefinancial statements. While it inevitably results in a certain loss ofsovereignty over an individual country's accounting standard-setting, in theend the adoption of IFRS as issued by the IASB is the right approach, ratherthan convergence of domestic accounting standards to something similar.
The FASB/IASB convergence program has been welcome, as itwill enable the two sets of accounting standards to be significantly closer bythe end of 2011, the point at which the SEC is due to make a decision on theadoption of IFRS in the U.S. However, convergence is not ultimately the rightanswer for the U.S., as differences would inevitably remain, meaning that thegoal of true comparability would be lost, as would some of the significantbenefits of the single accounting language.
I am pleased with the transparency of the SEC's workplanfor adoption of IFRS and hope that it leads to adoption of IFRS in the U.S. Inany event, I do not believe that a further convergence program between U.S.GAAP and IFRS is sustainable.
-- Jack Weisbaum, CEO, BDO USA
Globalization is not just a buzzword; it's the reality ofthe world that we live in. Global accounting standards will happen; thequestion now is "when" and how." As the final touches are put onthe roadmap and implementation of the rules and regulations begin, great caremust be taken to protect against fraudulent financial reporting. This industry,and our individual professional careers, are built on the reputation andtrusted relationships with our clients. If we don't protect that with the newstandards, the foundation of our industry will surely be rocked and couldchange how individuals and businesses look at us forever.
-- Sandra L. Wiley, Partner, Senior consultant and COO,Boomer Consulting
The world is shrinking and the more consistently thatglobal businesses can account for transactions and report their financialstatus, the better it will be for investors and other users of financialstatements.
In my work and travels, I feel that most U.S.practitioners -- in firms of virtually all sizes -- are not actively preparingfor IFRS or the convergence of standards. I am not sure if this represents afeeling that such preparation would be premature, given the two boards arestill negotiating, or whether there is a lack of understanding of the impact tofirms and clients of all sizes if FASB and the IASB are able to meet their June2011 initial deadline. I believe firms who are dedicating resources tounderstanding the proposed changes to U.S. GAAP or have already had to navigateIFRS due to international client work, will have a competitive advantagebeginning in 2011.
-- Jennifer Lee Wilson, Co-founder and owner,ConvergenceCoaching
I believe that the current attempts to create a singleset of accounting standards, through convergence, have the highest probabilityof success. Setting international standards has many questions that need to bediscussed and resolved. For example, standards are different across the globe,with U.S. standards being more precise and rule-based, where as theinternational standards (IFRS) are more judgmental. Whose standards shouldpredominate? And will a single set of standards work in countries with vastlydifferent economic systems? As consensus develops around these questions, aglobal system will emerge, in my opinion; but it will take time, and I believethe incremental efforts as defined by convergence are the best way to achievethe goals of global accounting standards.
-- Yacov Wrocherinsky, CEO, Infinity Info Systems
Global "convergence" on a single set ofhigh-quality accounting standards is going to happen. The economic logicsupporting this direction is compelling: The present accounting tower of babblemakes no sense at all. However, the obstacles to convergence are many. Alas, atthe top of the list is political interference by our governmentalrepresentatives, both within the U.S. and within the E.U. Over time, we willmove forward. But it's going to take time.
-- Michael R. Young, Partner, Willkie Farr &Gallagher
I believe a single set of global accounting standards areessential because the profession and the clients we serve are global. Evensmall businesses today tap into world markets. If the public is to be protectedon a global basis, there must be global accounting standards. I'm not convincedthat they should be pursued differently than they are being pursued at thepresent.
-- Donny J. Woods, President, National Society ofAccountants