Are International Financial ReportingStandards ready for the prime time of the U.S. capital markets? Will thestandard-setters be independent and free of undue regulatory influence? More importantly, for many private companies, how willthey be impacted by IFRS?
Those and other questions surrounding the often-divisiveissue of adoption or convergence of U.S. GAAP with IFRS were the subject of asession at a conference held this week by the American Institute of CPAs.Currently some 120 countries use some form of IFRS, with the best-case scenarioof U.S. adoption in 2015-2016.
"We could go for years without a major accountingstandard being released," said Dan Noll, director of accounting standardsat the AICPA. "Now FASB and the IASB are trying to get out for comment anumber of such major convergence topics as financial instruments, revenuerecognition and leases. Some of the topics like financial instruments areactually divergent between FASB and the IASB. Convergence is happening whetherthe US adopts IFRS or not."
Noll led a session, titled "IFRS for SMEs" atthe AICPA Practitioners Symposium & Tech+ Information TechnologyConference, here.
What about standards for private company standards?
"To its credit, FASB is trying to understand thedifference between private company and public company standards. But it's notled to any type of substantive movement. But [the Financial AccountingFoundation, overseer of FASB] embarked on a listening tour and heard fromconstituents about the need for private standards."
Toward that end, the AICPA, FAF and NASBA earlier thisyear formed the Blue Ribbon Panel on Standard Setting for Private Companies toaddress how accounting standards can best meet the needs of private companyfinancial statements.
Currently, private companies can choose between U.S.GAAP, GAAP with exceptions, or OCBOA -- other comprehensive basis ofaccounting.
Last year, the IFRS developed IFRS for Small andMedium-Sized Enterprises, a self-contained, stand-alone global accounting andfinancial reporting standard for companies that do not have publicaccountability.
Noll said private companies in the U.S. may choose to useto adopt IFRS for SMEs because it's less costly than U.S. GAAP, or, if thecompany has a foreign parent, investor, supplier or venture partner.
However, Noll pointed out that IFRS for SMEs and GAAP differin such areas as LIFO, which is not allowed under IFRS, or reversals ofprevious write-downs, which are not allowed under GAAP. Goodwill is amortizedunder SMEs but not under GAAP, while uncertain tax positions have a one-stepapproach to recognition under SME guidelines, but a two-step recognition andmeasurement approach under GAAP.
Similarities between the two include areas such asdepreciation, deferred taxes and capitalized costs.
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