The unanimous vote by the Securities and Exchange Commission to propose a "roadmap" for convergence towards the use of International Financial Reporting Standards by U.S. companies is a positive first step.The eventual use of global, country-neutral financial reporting standards for U.S. public companies will be superior in quality to both current U.S. generally accepted accounting principles and IFRS.
However, the journey to the end destination will require more in the way of guidance and other enablers in order to make the transition smooth and successful.
While we are confident that the global adoption of a single set of high-quality financial reporting standards will ultimately result in substantial benefits to investors and the business community at large, companies will need to consider the implications that these changes will have on their systems, including the application of "professional judgment" in a less rules-based system.
Understanding and applying globally accepted risk principles is an integral part of professional judgment, which empowers professionals within an organization to make sound business decisions based on expertise, rather than by "check the box" compliance processes. In order for the U.S. economy to stabilize and thrive throughout this historical period of instability, there needs to be a similar call to action - now - that provides an enabling plan to make sure the SEC roadmap is "directionally" correct, i.e., on education, training and certification relating to the new converged standards.
Universities and professional accounting associations will need to update their curricula accordingly in order to prepare students for a new set of global financial reporting standards - a huge undertaking that should begin immediately in preparation for these worldwide changes. Proper training, education and certification are necessary to render professional judgment utilizing the appropriate global body of knowledge in risk, quality and performance management.
The overall SEC roadmap plan is a great catalyst for constructive dialogue among stakeholders in the U.S. financial reporting supply chain.
The roadmap's proposal allows U.S. companies to use current IFRS in the short term so that those companies are not at a disadvantage when competing for capital in global markets. Additionally, the SEC recognized that smaller public companies may require more time than larger public companies to execute a transition to future IFRS, if mandated by the SEC. This will allow smaller companies to learn from the experiences of larger adopters and scale the implementation appropriately, so that they continue to fuel entrepreneurial economic growth while protecting investors.
The Institute of Management Accountants is taking proactive steps to prepare professional accountants and financial managers in business and industry for the transition to high-quality, global financial reporting standards.
The IMA's Financial Reporting Committee and Small Business Committee look forward to the opportunity to comment on the SEC's roadmap during the 60-day period that commences upon publication of the proposal in the Federal Register.
Jeffrey C. Thomson is president and CEO of the Institute of Management Accountants (www.imanet.org).
