The on-again, off-again status of IFRS is a fact of life for those of us in the accounting profession. But it's not an excuse for inaction.

IFRS - International Financial Reporting Standards - is in use across the globe. Here in the U.S. we follow generally accepted accounting principles, or GAAP. But signs that IFRS is making its way into American practices are everywhere. And for the first time this year, IFRS content has been incorporated into the U.S. CPA exam.

 

GLOBAL PERSPECTIVE

Thomas Calderon chairs the University of Akron's G.W. Daverio School of Accountancy, which is my alma mater. In a recent in-depth conversation, I learned about his efforts to bring IFRS knowledge to students and to help CPAs prepare for its inevitable arrival.

Despite his reputation as a respected scholar, Calderon's interest in IFRS is not purely academic. Calderon grew up in the Caribbean and practiced in the region, which gave him a decidedly British/global business orientation.

He's a visible and respected leader in the accounting arena. The curriculum he built at Akron goes well beyond the basic treatment of international accounting typical of many university offerings.

For more than five years, the university has incorporated IFRS into undergraduate and graduate accounting classes. The decision was prompted by a number of factors, including the global perspectives of Calderon and the accounting faculty at The University of Akron. Another was the 2007 Securities and Exchange Commission move to no longer require reconciliation of IFRS to GAAP for international registrants.

The Akron program has been responsive to moves by the Big Four to only recruit students with academic exposure to the standards. Also important was the recent introduction of IFRS content into standard accounting textbooks, which in large measure drives what is taught in the classroom.

Another motivation was the fact that the University of Akron program is accredited by the Association to Advance Collegiate Schools of Business. This prestigious accreditation carries the expectation that the curriculum includes a global perspective, and exposure to IFRS is an important way to address this requirement.

 

REACH OUT AND PARTNER

Calderon encourages forward-thinking CPA firms to partner with local universities that have IFRS expertise. Such arrangements can take a variety of forms. For example, your firm could collaborate with a university accounting department to sponsor an international accounting symposium, job fair or online IFRS-certification program.

Such relationships can be mutually beneficial. The university brings demonstrated expertise in the field as well as young talent to the profession, while the firm brings contacts and professional development opportunities.

They also lead to other types of collaboration. If an international engagement requires a native speaker of a particular foreign language, a university is a likely resource for that expertise.

It can be difficult, if not impossible, in an early market to know where you will find traction or acceptance. By associating with a university with demonstrated leadership, you gain entrée into a community of engagement and expertise.

Other benefits include boosting your firm's visibility among job candidates. International practice is highly regarded by young CPAs attracted to foreign travel and culture.

An academic affiliation can also help identify potential niche markets or industries. Getting to know professors who are active in specific internationally oriented industries can lead to valuable connections.

 

SIZABLE CRUMBS

Once IFRS is adopted in the U.S., it's hard to predict the impact on large CPA firms. Will they be inundated with requests for service? Will they be conflicted out of certain services? It's hard to know. But by developing internal expertise, small and midsized firms stand to potentially gain significantly if they are poised to take advantage of market dynamics.

The obvious comparison is to the Sarbanes-Oxley fallout. Large firms, overwhelmed with business and conflicted out of many engagements, turned to smaller firms to pick up the pieces. These "crumbs" were significant and helped fuel impressive growth of next-tier firms during the early part of the last decade.

But let's say there are no large crumbs falling from the high end of the market. The other potential scenario is that smaller U.S. subs of foreign parents may prefer the attention of a local CPA firm to being a small client of a Big Four firm. We know historically that changes in standards almost always produce market opportunities.

 

THE WORLD IS NOT FLAT

While there is no certainty about when or if IFRS will be adopted, we cannot afford to be left behind other countries. According to the American Institute of CPAs, "the SEC is taking steps to determine whether to incorporate IFRS into the financial reporting system for U.S. issuers and, if so, when and how."

Calderon believes that IFRS will be woven into the current GAAP standards, with likely convergence between the two. Another possibility is that IFRS would be superimposed over GAAP. Whatever the structure, he argues that U.S. firms should avoid isolation and be prepared for the movement toward global reporting.

 

Gale Crosley, CPA, has been named one of the Top 100 Most Influential People in Accounting by Accounting Today for six consecutive years. She is an honors accounting graduate from the University of Akron, Ohio, and winner of the Simonetti Distinguished Business Alumni Award.

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