The Institute of Management Accountants has joined a widespread call for the Securities and Exchange Commission to accept financial reports prepared under international accounting standards without reconciliation with U.S. generally accepted accounting principles.The IMA's main concern is not so much that filings by foreign companies might be easier, but that convergence with international standards would effectively replace the U.S. set of standards - which the institute believes are onerous, if not downright crushing.

"We are very accepting of IFRS without reconciliation in the short-to-medium term," IMA president and chief executive officer Paul Sharman said. "We believe that the direction toward convergence is important in the medium-to-longer term. The challenges we have with that are that there are some things in IFRS that are going to be very costly to some corporations. Revising accounting systems, for example. A shift in accounting treatment for inventory."

As for whether U.S. companies should be allowed to use IFRS if foreign companies can, Sharman asked, "Why not?" The group's Financial Reporting Committee, however, had not as yet taken a position on that possibility, though it was working on one.

The IMA has long advocated simpler accounting standards, and it sees switching to or converging with IFRS as a relatively quick way to adopt a set of principles that Sharman says are roughly a quarter as voluminous as U.S. GAAP, which is said to fill over 12,000 pages.

"It's gotten to the point where we can't do business," Sharman said. "We're stifling creativity. I recognize the need for rules, but where's the rule for good business judgment?"

Sharman likened the convergence process to the un-making of a stew. By shifting to IFRS, the U.S. would be, in a sense, pouring the stew through a strainer, eliminating unnecessary elements while retaining "the big chunks." Accepting IFRS without reconciliation, he said, is a first, big step toward straining out the extraneous.

The FRC also expressed approval of the International Accounting Standards Board's efforts to produce "scalable" standards that would allow small and midsized companies to meet simpler requirements.

WHITHER CONVERGENCE?

Meanwhile, the Financial Accounting Standards Board has been working toward convergence for several years. Much progress has been made, especially on the more comparable standards, but much remains to be done. In a comment letter to the SEC, the IMA's FRC said that the acceptance of IFRS should not depend on the degree of convergence.

"While we fully support the goal of uniform, high-quality accounting standards, we believe it is unlikely that there will ever be complete convergence," the letter stated.

The letter went on to suggest that eliminating the reconciliation requirement might spur the convergence process as the Financial Accounting Standards Board and the International Accounting Standards Board "compete" to produce the better standards.

Though IFRS may impose less of a burden on the preparers of financial statements, making the shift, if it ever becomes possible or necessary, will create its own burden.

Rick Burton, CMA, CPA and chief financial officer of Specialized Transportation Inc. in Fort Wayne, Ind., said that American companies are likely to accept the change without complaint. "One set of standards that puts everyone on equal footing should be the goal for all of us - accountants, auditors and analysts," Burton said. "Long term, there will be benefits, while short term there will be time and effort needed, first in education, then in the conversion process itself."

One concern among investors and analysts is that allowing some companies to use IFRS while others use GAAP would result in financial statements that are less than adequately comparable. Burton feels that the two sets of principles are sufficiently converged for preparers to begin using them, though it may require some work by analysts.

"There are still several significant differences between IFRS and U.S. GAAP," he said. "Those differences have been well documented and can be found from a number of sources. Sophisticated users ... are aware of these differences and can take them into account if necessary to compare companies filing under different standards."

Overall, Burton says, the U.S. is ready for IFRS. He sees large corporations already using international standards at foreign subsidiaries, though smaller companies will have to shift from passive to active and accelerate their learning curves.

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