We read with interest and concern the March “Spirit of Accounting” column in Accounting Today (“IFRS 'non-vergence’ and the CPA Exam: Calling the AICPA to account,” page 19).

The American Institute of CPAs’ leadership and the Board of Examiners believe, based on an exhaustive and authoritative review of modern CPA professional knowledge and skills, that American accounting students need a basic grounding in International Financial Reporting Standards.

The content of the CPA Examination is determined through a rigorous process that combines both empirical evidence and expert judgment. This process included an opportunity for public comment. The results of the practice analysis, available online at www.aicpa.org, provided compelling evidence that the CPA Exam should test for basic knowledge of IFRS. CPAs who supervise entry-level CPAs agreed that IFRS reporting is a growing part of the work required of new accountants.

A review of financial markets around the globe demonstrates the need for U.S. CPAs to understand IFRS if they are to serve their clients and companies well and protect the public interest. A single set of high-quality, globally accepted accounting standards is part of the agenda of the Trans-Atlantic Business Dialogue — the chief trade liberalization forum between the U.S. and the European Union — as well as the global economic agenda of the G-20 industrialized and emerging economies. There are good reasons for this ambition, including that it promises to improve the flow of investment and capital between nations and lead to greater economic productivity and rising wealth.

IFRS is already in use in the U.S. and is gaining wider acceptance all the time. There are more than 100 companies with recognizable names such as Nokia, Siemens, Novartis, GlaxoSmithKline, Vodafone and Royal Dutch Shell using IFRS for their financial reports. These IFRS shares are bought and sold daily by American investors on the New York Stock Exchange and Nasdaq.

Increasingly, U.S. CPAs are being asked to prepare fin­ancial reports for U.S. subsidiaries of foreign-owned companies in IFRS. This is more than anecdotal; 12.5 percent of AICPA members say that they or their clients are actively preparing to adopt or are ready to adopt IFRS. In addition, 77.5 percent of members say that they already have at least a basic knowledge of IFRS. There are more than 120 nations worldwide that have adopted or are moving toward adoption of IFRS.

The 2007-2009 financial crisis proved that we are living in an economy that relies on interconnected global financial markets. Rightly, the Securities and Exchange Commission’s policy assessment on IFRS is being taken with reference to the crisis and its effect on investor confidence, as well as the complexities of meshing the International Accounting Standards Board and Financial Accounting Standards Board standards. To SEC chair Mary Schapiro’s credit, she is leading the SEC in a thoughtful and appropriate evaluation of how best to bring U.S. GAAP and IFRS together.

Virtually all of the important policy work being done now at FASB is aimed at harmonizing GAAP with IFRS by taking the best of both sets of standards and narrowing the differences between them. That means that much of the new standards coming out of Norwalk over the next couple of years will be aimed at bringing GAAP and IFRS closer together. To properly assess and implement those forthcoming standards, new CPAs today will need to understand what IFRS is, have a basic handle on its core principles, and understand how it’s different from GAAP.

In the end, the changes to U.S. and world accounting standards are market-driven and are a logical consequence of economic globalization. The goal is to improve the quality, transparency and relevance of financial information on behalf of investors and management. The AICPA’s leadership role has been and remains to advocate on behalf of the U.S. profession for high-quality standards and to provide help and assistance to our members. Students today should understand that the successful career tracks of the future are very likely to involve usage, if not mastery, of IFRS.


Arleen Thomas

Senior vice president of member competency and development

American Institute of CPAs

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