The timeline for adoption of International Financial Reporting Standards in the United States faces several hurdles, including the long-delayed appointment of several SEC commissioners.
That hurdle may be overcome soon, now that the Senate Finance Committee has finally held hearings on the three nominees who have been appointed to replace the missing members of the five-person commission. Those hearings took place only last week, but it's unlikely the SEC will set a definite date for the roadmap to IFRS from generally accepted accounting principles until those members are in place.
That's what John White, director of the SEC's corporate finance division, told a Financial Executives International conference in New York last week. And if it takes until the next election, then we may see the roadmap stretching out even further. The Bush administration has already told agencies that any new rules should be proposed by June 1 and the final rules issued by Nov. 1 (see XBRL, IFRS Plans May Be Delayed by the White House). So far, the SEC has only gotten as far as allowing foreign companies to submit their financial filings in accordance with IFRS without having to reconcile them with GAAP. Another meeting on the roadmap is set for next week with investor groups and corporate representatives.
More than 100 countries are already ahead of the U.S. in adopting IFRS. Richard Martin, head of financial reporting at the London-based Associated of Chartered Certified Accountants, and Colin Davis, head of international communications at ACCA, stopped by the Accountants Media Group offices to discuss the state of IFRS with some of the editors here. They believe the U.S. will eventually set a date of 2010 or 2011 for IFRS adoption and noted that the Financial Accounting Standards Board is already working on convergence with this date in mind. One reason why is that our neighbor Canada is planning to make the transition by 2011, which will probably prod the U.S. to stay more or less in sync. FASB director Robert Herz recently predicted three to five years for IFRS adoption in the U.S.
Training is going to be key. The American Institute of CPAs has already proposed including IFRS questions in the Uniform CPA Exam. ACCA has experience with administering tests based on IFRS, and Martin said that ACCA would be glad to offer assistance to the AICPA.
Administering an international exam isn't easy, though. ACCA must be careful to monitor differences in time zone so a student in Hong Kong can't text message a test answer to a colleague who is scheduled to take a test the same day in England. But ACCA is finding increasing demand from students around the world who want to gain certification or even just attend continuing professional education sessions. In Ethiopia recently, hundreds of attendees traveled great distances on foot and even through gunfire to get to a CPE event, Davis noted.
With countries like China moving to adopt IFRS, accountants in the U.S. will see a lot more competition once we move to international standards. But GAAP isn't likely to go away completely for some time yet.
Many private companies are still using the U.K. version of GAAP, for example, even though Europe adopted IFRS for public companies in 2005. Eventually, it's likely that private companies too will be pressured to adopt some form of IFRS to make their financial statements more comparable with those of public company competitors, especially if they plan to eventually go public or become M&A candidates.
But it won't be easy for us to give up on GAAP either. With all those years of guidance and thousands of pages of rules built up, making the jump to principles-based professional judgment is going to require a whole different mindset.
Register or login for access to this item and much more
All Accounting Today content is archived after seven days.
Community members receive:
- All recent and archived articles
- Conference offers and updates
- A full menu of enewsletter options
- Web seminars, white papers, ebooks
Already have an account? Log In
Don't have an account? Register for Free Unlimited Access