Before the SEC published its roadmap for the switch to International Financial Reporting Standards, we asked a large group of industry leaders if they thought the accounting profession was ready for the shift - and if not, what it needs to do to get ready.
We have been discussing international convergence and the potential move to IFRS in the U.S. with many groups, most recently at a June 16 forum that we hosted specifically on this topic. While there appears to be fairly widespread support for movement to "a single set of high-quality international standards," a variety of views were expressed regarding the state of readiness and the many system-wide infrastructure issues that would need to be addressed to ensure an orderly transition. In general, commentators from large companies and the major audit firms seem to be the furthest along in their awareness of this subject and in beginning to address the related issues. Representatives from smaller and private companies and smaller accounting practitioners generally felt that they would need more time to adjust to any such change.
- Robert H. Herz, Chairman, FASB
I believe the accounting profession is ready to shift to International Financial Reporting Standards as a goal. I believe it will take approximately three years to get all the training, research materials, educators and the CPA Exam updated. Some firms will progress faster than others, but I know the AICPA will be at the forefront in training and equipping our profession to be the gold standard in this arena.
- Ernest A. Almonte, Incoming Chair, AICPA
I guess, whether they are ready or not, IFRS is going to be implemented in some shape or form. I believe the accounting profession will get enough time (three to five years) to get ready. As we could handle Sarbanes-Oxley, we can easily handle IFRS
- Chandra Bhansali, President, AccountantsWorld
There seem to be very disparate positions regarding the implementation and acceptance of International Financial Reporting Standards as a basis for financial reporting in the U.S. However, in spite of the passionate arguments for maintaining GAAP as the predominant standard, the reality of the globalization of the accounting industry dictates that a single accounting standard may be necessary as financial information is compared. With the Securities and Exchange Commission already considering the acceptance or adoption of IFRS, the movement towards IFRS by Canada and Mexico, and the growing support from the investment community, the proverbial horse has left the barn. To prepare the U.S. industry, the content specifications of the Uniform CPA Examination should be updated to include IFRS to incentivize colleges and universities to begin the augmentation of curricula for future students, and IFRS-based continuing education should be developed for U.S. firms.
- Ken L. Bishop, Senior VP and director of CPA Exam operations, NASBA
The profession will be ready when the official shift occurs somewhere between 2012 and 2014. It is not ready for the shift that is already occurring, caused by the SEC's decision to allow foreign registrants to file using IFRS and more importantly due to the many private companies that are being forced to convert to IFRS due to purchase by foreign companies and private equity funds. IFRS is here now, and even local firms are being asked to deal with it. "Dealing with it" requires both training and experience.
Everyone can find the training over time, but fewer firms can find the "experience" needed to get through the start-up period. Midsized firms can and are finding experience by temporarily transferring in senior people from Europe, which is in its third year with IFRS. Medium-sized and small firms will be able to find training, but they will need help from larger firms to develop the experience required to apply IFRS.
- Robert Bunting, Incoming President, IFAC
Most CPAs are going to be fine with the technical side of IFRS. The AICPA is leading the dissemination of awareness and knowledge, providing resources and tools to help firms. The Big Four are on top of it as well. Most heads of audit practices are becoming knowledgeable about what needs to be done to become ready. However, there is a big difference between becoming technically ready and identifying growth strategies and additional opportunities. Changes in regulation always bring about changes in market dynamics and (sometimes huge) marketplace opportunities. This is where most firms are asleep at the switch. Why? Because the job description of most audit department heads is usually 100 percent delivery-related. When it comes to strategic direction and growth, many of these people don't think it's their job. As a result, the firm might comply with the technical requirements of understanding and implementing IFRS, but misses the strategic big picture. Consider those firms where leaders read the early Sarbanes-Oxley literature, grabbed the significance of 404, and were early to market with a whole new set of services. There will be several needs and opportunities as the result of IFRS. Already the demand for guidance has started. And if a firm isn't determining how to serve it up, someone else will serve it up for them (to their clients)! I am advising firms to look for an opportunity to implement IFRS in a current client as soon as possible. That way, they'll have the experience to be first to market and can highlight their experience to prospects.
- Gale Crosley, President, Crosley+Co.
Converting to IFRS will take about five years. I say this because the college curriculum will have to change and the CPA Exam content will also have to change. Various contracts/loan agreements that are based on U.S. GAAP will have to change. Companies IT systems, internal controls, accounting policies, etc., will be required to change. This will take time to implement effectively. The accounting profession (business, academic, regulatory and audit) is just beginning to acknowledge that IFRS will be a reality and they must be ready when it arrives.
- Frank K. Ross, Director, Center for Accounting Education, Howard University
I believe that many practitioners (small firms and sole proprietors who make up most of the AICPA membership) are not fully aware of how fast it is approaching and how it will affect their practices.
- Rita A. Keller, Shareholder and COO, Brady Ware
First of all, the shift to International Financial Reporting Standards is critical to the long-term success of our profession. We need to have global standards that investors can rely on and feel comfortable with, and we need to work toward getting those standards accepted within the United States. Currently, the profession is not ready, and it is not just the accounting profession - companies are not ready. Corporate America is not ready for IFRS. Even more importantly, the investing community knows little about IFRS and the various benefits and related issues that will result from their adoption.
So, too, universities are not ready. They are not training our accounting students adequately on this yet. Thus, the transition to IFRS requires the equivalent of a cultural and professional sea change. Certainly the accounting profession plays a major role in this shift. Grant Thornton LLP has been conducting training sessions on IFRS for years (approximately five years now). We need to conduct more training sessions, and we need to expand the application of that training in audits. We have clients that are already using IFRS; however, not many people who are getting trained in IFRS are actually putting them into practice.
Until you start applying IFRS, related training cannot be as effective without hands-on experience. Our firm and the profession are getting some on-the-job training - and not just in the United States. Certainly throughout Europe, Grant Thornton member firms are getting real-life IFRS experience.
Where businesses are concerned, every major company, if it is going to shift to IFRS, needs to figure out the impact that the shift will have on its business and industry. Then it will have to tackle the development and implementation of massive training.
The conversion will involve literally thousands of different decisions that will have to be made on the accounting treatments and the accounting policies. Every company will have myriad decisions to make as it goes through its books and records to convert from U.S. GAAP to IFRS. Cost will be a major factor, but still greater factors will be the time and effort that go into that decision-making and the exercise of judgment.
My estimate would be that, at the corporate level, the process will take somewhere between three and five years. Accounting firms, including Grant Thornton, can move much faster because the learning curve has already begun.
It will be much tougher for corporations to manage the shift. Typically, they cannot conduct training in-house. It will be particularly difficult for small and medium-sized companies, but larger companies will struggle too. Because neither university accounting professors nor their students are being fully trained in IFRS, there are a limited number of people who can actually conduct this training.
In a global accounting organization, there are a number of national and international resources to call upon when complex issues of interpretation come up. When a company sends its accountants out for training, these people return as their company's most well-trained professionals on the fine points of IFRS. As they put their training into practice and come up with questions (and they will, particularly at the beginning), they will likely lack in-house expertise to rely upon.
Beyond the learning curve itself - learning, understanding and interpreting the specific standards and their impact on investment decisions, for example - there are also a number of decisions that need to be made during the application process. It will be important to understand what investors need in order to make the best global decisions, what the SEC will find acceptable for filings, what the PCAOB believes can be audited, and so forth. The regulatory oversight process will take some time to evolve as well, as regulators address and debate issues that arise. The accounting profession must work with the investment community to ensure that the application of IFRS provides an improvement to global financial analysis.
Finally, beyond the massive expense entailed, the primary issues are training and the invaluable experience of real-world application - for investors, accounting firms, universities and accounting students, and corporate America.
- Edward E. Nusbaum, CEO and executive partner, Grant Thornton LLP
I strongly believe that there should be a shift to the International Financial Reporting Standards because most businesses are doing business on a global basis and consistent accounting principles are important to financial reporting.
- Manny Espinoza, CEO, ALPFA
I believe that nothing will happen until the SEC sets a date certain for public companies to file using IFRS. Then the dominos will start to fall, starting with education of current CPAs and preparers, changes to college curriculum and the CPA Exam, revisions to bank analysis software, changes in the Tax Code and a path forward for private companies.
- Judith O'Dell, Chair, FASB Private Companies Financial Reporting Committee
IFRS is a journey, not a destination. Some will travel more rapidly over the road than others depending upon the markets they serve. An unfunded mandate or inflexible deadline will fail to achieve what market-driven incentives will. Thoughtful individuals are beginning to assess where to place their scarce training and practice resources, and to assess precisely what benefits will enure to them. With many competing priorities, including the promotion, for example, of XBRL, one must be sure that the benefits will outweigh added costs.
- Gary John Previts, Professor of Accountancy, Weatherhead School of Management, Case Western Reserve University
--The American accounting profession does not like spending time and money unduly. I have great faith in today's accountants. When the time comes that they need to know International Financial Reporting Standards, then they will learn them. Until necessary, they will spend their time on more immediate problems. Each year, the profession adapts to changes in the tax laws and does so quickly and efficiently. I believe the same will happen with IFRS. I am not Chicken Little who thinks the sky is going to fall.
- Joe Ben Hoyle, President, CPA Review for Free
Not at the present time. There is a great need to develop training material for the practicing CPA, who at the present time has very little awareness of the International Financial Reporting Standards. The AICPA, the various state societies and other professional organizations that are involved in continuing professional education will have to play a major role in developing course material on these new reporting standards.
The major accounting book publishers will have to play a major role in developing material on International Financial Reporting Standards.
Course material for the college accounting courses and graduate schools will have to be modified to reflect these new standards.
- Sidney Kess, Educator and tax expert
We are ready to shift to International Reporting Standards for several reasons, most prevalent being the shrinking global environment and the ability to communicate rapidly around the world. The institutionalization of outsourcing, the intervention of technology and international clientele are good reasons for such. The integration of international associations also make the initiative imperative.
- Jay N. Nisberg, President, Jay Nisberg & Associates
No. The financial community needs to be educated on the IFRS requirements as we move from GAAP (rules-based) to the IFRS (principles-based) accounting mechanisms, and presently this education is woefully lacking. Moreover, significant issues need to be resolved, such as the use of LIFO under GAAP, which is not permitted under IFRS, and whether XBRL should be mandated before a move from GAAP to IFRS as the taxonomies are different.
- John H. Nugent, Associate professor, University of Dallas Graduate School of Management
Yes. It has been a long time coming and a step in the right direction. As the business world goes global, there should be one set of financial reporting standards.
- Jeff Chin, President, Ascend Inc.
From what I have been able observe, the U.S. is not yet ready for the shift to IFRS.
Several things need to happen.
First, our accounting programs will need to start teaching the new standards and professors will need to learn them. There will need to be a close relationship between the Big Four and major accounting programs.
Second, the various U.S. regulatory bodies will need to find a common ground. There is a real danger of this process becoming politicized. While the SEC seems to be excited about new standards, FASB is not.
In conclusion, it will be some time before the U.S. adopts the new standards.
- August Aquila, President and CEO, Aquila Global Advisors and Chantrey Capital Advisors
The profession is not ready to shift. To get ready, we need to:
-- Establish a training methodology for the transition to IFRS;
-- Conform the college level curriculum to encompass IFRS;
-- Revise the CPA Exam; and,
-- Work closely with CPA associations from other countries to gain their insight and assistance on the transition.
- Charles Weinstein, Managing partner, Eisner LLP
Although the U.S. accounting firms are not quite ready from a procedural and checklist perspective, many have considered the impact, and the innovative firms are ready now. To be ready, integration of automated tools representing the standards need to be integrated into the key engagement managers of Engagement CS, CCH Engagement and CaseWare. Additionally, training of the auditors for differences in the U.S. and international standards needs to be completed.
- Randy Johnston, Executive vice president and partner, K2 Enterprises
Yes, international convergence of standards has been needed for several years and should be delayed no longer.
- Troy Waugh, CEO, FiveStar3
The issue on the forefront before the IFRS readiness question is that the profession first needs to become more knowledgeable on international business as a whole. Businesses of all sizes are seeing many opportunities internationally and are seeking the answers to the "how" and "what's involved" from their CPA. IFRS learning will follow.
- James C. Metzler, Vice President of Small Firm Interests, AICPA
The accounting profession is not traditionally known as "early adaptors" but they are intelligent and they know that globalization is imminent. Many have already read "The World is Flat" by Thomas Friedman and have added it to their list of life-altering reads. They see the vision, and while most professionals are not ready for the change today, they will use the next few years to read, study and implement policies that will prepare them for the changes necessary to make this revolutionary shift.
- Sandra Wiley, Senior consultant and COO, Boomer Consulting Inc.
No -- we need an intense education program for our profession to better understand the differences between GAAP and IFRS.
- David K. Morgan, Chair, PCPS Executive Committee, AICPA
Not yet. As commendable as this concept is in our increasingly global business world, we need to establish an implementation date and reverse engineer the timing to properly stage the required training, conversion activities, and to inform the public about what they need to know.
- William M. Hermann, Managing partner, Plante & Moran
Shifting to IFRS certainly makes sense given the global nature of modern business. But making that shift will be a major undertaking, as it will require most accountants to be retrained in a reporting standard they have no experience with. Before accountants can be retrained there needs to be IFRS teachers and textbooks. It is hard to imagine that the significant investment required to modify our accounting educational system will be made until the SEC provides a firm deadline for the switch to IFRS.
-- David Wyle, President and CEO, SurePrep LLC
No matter how worthwhile, I find the vast majority of CPA professionals do not deal with publicly traded companies. They have very little awareness of details and issues, thus making implementation of the standards very difficult. A more serious timeline should be considered. The timeline would provide ample time for a serious education program that could be implemented so practitioners could become acclimated to the International Financial Reporting Standards.
- Louis Grumet, Executive director, NYSSCPA
The large firms in the accounting profession are well on their way to being ready for IFRS. The accounting profession has become a worldwide assortment of accounting professionals, in various degrees of preparedness. European accountants, for example, have more experience with IRFS than their U.S. counterparts. Canada is a step ahead of the U.S., so firms and companies in Canada are in training mode now. Therefore, the major firms have the capacity to transfer talent around the world to meet the rather large emerging need in the United States.
The major firms report that they have the training ready and will begin extensive training when the road map -- i.e., timing of implementation - is in place.
As for preparers of financial statements and corporate accountants, they are much less prepared and would have to rely on help in the form of projects and training from accounting and other professional services firms. Educators in the US have a great opportunity if they can get their training programs ready.
- Michael P. Cangemi, Immediate past president and CEO, FEI
If financial reporting does move into a more "principles-based" world in which professional judgment plays a larger role, auditors of public companies will be well served to focus on certain fundamentals. Those fundamentals include maintaining an independent mental attitude, which includes being professional skeptical; performing their audits with due professional care; and evaluating whether the financial statements they are auditing are fairly presented, not solely whether those financials are in compliance with the rules.
Thomas Ray, Chief accountant, PCAOB
Theoretically, the shift to International Financial Reporting Standards is a good concept -- accountants worldwide should be "talking the same language." Unfortunately, however, I feel that the standards, as drafted, are not practical for the majority of firms. The standards have been drafted for large firms that are currently dealing with such issues, but will have far-reaching implications for regional and local firms that will have to operate within the confines of those rules. In practice, I believe the standards will put an unfair burden on these firms and leadership needs to take a more active role in addressing the broader future implications.
- Mark Albrecht, CEO, XCM Solutions/Xpitax LLC
The profession is not yet ready for IFRS, but tremendous progress is being made on many fronts. The AICPA has recently launched www.ifrs.com to help everyone learn and prepare. The Big Four firms have already shifted almost everywhere but in the U.S., and they are ready to move quickly. They are educating their mostly large-business clients now. Multinational companies are in the same state, with lots of knowledge. There are two areas that need attention. First is the whole concept of "principles-based accounting," which will hit certain industries like mine, software and services, very hard. The depth of "rules" in these industries for things like revenue recognition is significant and it's not clear how the profession will guide issuers as they establish "principles" and move to IFRS. Will the rules go away, or be layered on top of the principles? The second big issue is with the pipeline of people entering the profession. Accounting education in the U.S. (courses, textbooks, CPA Exams, etc) currently has little or no IFRS content.
- Mike Braun, President and CEO, Intacct Corp.
Yes -- I believe the profession is anxious to adopt a more international approach given the increasing global nature of client businesses and the economy. Two components necessary for CPAs to prepare for this shift are education and an accompanying willingness to think beyond traditional methods of doing things.
-- David M. Cieslak, Principal, Arxis Technology Inc.
I believe the benefits for all market participants would be substantial if a common accounting language was universally and easily accessible to preparers and investors. To that end, I am confident the auditing profession in the U.S. is ready to support the use of IFRS by public corporations, including during any optional period.
Our recent member survey found that IFRS sits atop the list of issues of importance to firms of all sizes. In the months to come, the CAQ is likely to engage in an effort to help public company auditors -- and other stakeholders -- become more familiar with the proposal to adopt a single set of high-quality standards.
As you know, the SEC has not yet set a date for public companies to shift from U.S. GAAP to IFRS. Nonetheless, the largest accounting firms have trained key partners and staff on IFRS and have begun the process of training additional partners and personnel on IFRS. These firms, as well as the AICPA -- with whom we are affiliated -- also have established Web sites and provided other training opportunities for clients and others to learn more of the details about IFRS. Importantly, a number of firms have also launched educational efforts to help accounting professors and students prepare for the eventual transition.
-- Cynthia Fornelli, Executive Director, Center for Audit Quality
No, I don't think the accounting profession is ready for the shift to IFRS. What does it need to do? Pretty much everything. I guess we should start with completing the standards themselves and taking things to a level of convergence with which everyone is satisfied. Beyond that, the resulting standards need to be published. They need to be taught. Companies and other preparers need to train their in-house accounting departments. Outside accounting firms need to train their people. Analysts, investors, lenders and other users need to understand them and adjust their models accordingly. And regulators - the SEC, the PCAOB and others - need to learn how they work.
-- Michael R. Young, Partner, Willkie Farr & Gallagher LLP
With more companies preparing for the likely transition to IFRS, the accounting profession is moving in the right direction. Yet there remains much work to be done.
One of the key actions that organizations need to take is to prepare their employees, which involves a multi-step approach. First, companies will need to find and hire professionals with IFRS expertise, which may prove challenging and take some time since many U.S. accountants have not had to work with these standards previously. As a result, firms also will need to identify interim solutions, such as bringing in external experts, consultants or project staff who can come in immediately and help train full-time personnel. Employers also should provide their teams with training on IFRS and access to outside professional-development resources.
Businesses are not the only entities that must make changes. Individual practitioners have a responsibility as well and need to take it upon themselves to learn more about IFRS and its impact on their roles and responsibilities.
In addition, universities must continue incorporating IFRS into their accounting curricula. More than just a new set of standards, IFRS represents a shift in reporting approach. Along with teaching the fundamentals of IFRS, professors will need to help students enhance their professional judgment and improve their analytical and critical-thinking skills, which are key components of principles-based reporting.
Professional and industry associations can play a role in the transition as well. Incorporating IFRS into conference offerings, seminars and continuing education programs is a natural first step, and organizations also should serve as a resource for members who have questions or are looking for additional assistance.
-- Harold M. Messmer Jr., Chairman and CEO, Robert Half International
The accounting profession's not ready, the academic community is not ready and the accountancy regulators are not only not ready, they have not seriously discussed and vetted IFRS with constituent groups. The state boards of accountancy, the largest accountancy regulator in the world, have not even been approached on the subject. What nonsense is that? To get ready for acceptance, the appropriate U.S. regulators, the education community, and the majority of accounting firms and businesses must be included in the conversations. So far the discussions have been held in Europe, Asia and other places but not carried out very well in the influential economy of the U.S.
-- David Costello, President and CEO, NASBA
In a word, no. I am all for international standards. In fact, I believe there should be competing standards, perhaps adopted by each stock exchange. Let the free market put a price on the various benefits and costs of different standards, and you would see the cost of capital adjust to the various standards, representing their true benefits and costs, rather than supposed benefits proposed by regulatory agencies and people's opinions.
I'm also for letting the stock exchanges hire, and pay, the auditors for their listing companies. One issue that the CPA profession, regulators, and Congress refuses to deal with -- the 800-pound gorilla in the room that everyone ignores -- is how can auditors be "independent" if they are paid by the very companies they audit? If we want independence in fact and appearance, then let the stock exchanges pay the auditors. These reforms have been proposed by William Niskanen of the Cato Institute.
Also, let's eliminate the state-granted monopoly to the auditing profession and open up the attest function to competition, letting insurance companies, banks, etc., enter the fray. This would lead to innovative new products -- perhaps financial statement insurance -- and services that we can't even imagine, and it would be better than a one-size-fits-all regulatory model that is completely redundant, adds little value, and imposes costs that exceed its benefits.
But here's why I believe we are not ready for IFRS: We would need serious tort reform, which is why U.S. GAAP is rules-based rather than principle-based in the first place. Without tort reform, the U.S. will simply add rules and regulations until we end up with GAAP as we know it now.
Second, CPA education, and on-the-job training, is not designed for the judgment and thinking necessary to apply principles-based standards. Our CPAs have a "check the box" mentality, rather than one of applying judgment, wisdom, experience and sometimes just plain common sense, which is why we had some of the accounting scandals of the early 2000s.
As Tony Tinker wrote in his 1985 book "Paper Prophets: A Social Critique of Accounting" (a book I highly disagree with, except for this statement):
"Professional accounting education is certainly not a talk shop for exploring the meaning of social existence: Rather it resembles a rote learning process in which students are inculcated with the profession's party line by pedantic and legalistic methods. Instead, every year some 50,000 new U.S. students are overwhelmed with a welter of technical and legalistic material that has no apparent connection to the conflicts and complexities of social existence. The ultimate trivialization and degradation of accounting is the near obsession with rules and bookkeeping procedures. Today's students are trained to become greyhounds in bookkeeping and ignoramuses in social analysis."
When we ask audiences of accountants around the world if they have recommended the profession to a loved one, only 5-15 percent respond yes. When we ask the people who don't recommend the profession, the No. 1 reason why is they believe the profession is over-regulated -- that the fun and purpose has been drained from the average accountant with the amount of rules and regulations they must follow. We believe this is a harbinger of the future for the profession.
Unless we can roll back the litigious nature of our country, reduce the complexity of our GAAP and regulatory requirements, and start teaching CPAs to think like true professionals who rely on judgment more than rules, we are destined to become a profession of rote, high-priced bookkeepers rather than maintaining the status of premiere financial profession we once had.
Of course, the profession has waxed rich off SOX so they have no incentive to work hard against the furthering encroachment of government regulation. But this is economically myopic. SOX and other regulations are eating our young, and the profession is already paying the price by not being able to attract and inspire the best talent.
For these reasons, along with the endemic business model that CPA leaders are mired in -- one of "We sell time" -- I am far less sanguine about the prospects of IFRS than many of my brethren.
-- Ronald Joseph Baker, Founder, VeraSage Institute
I've been pleasantly surprised at the acceptance of the accounting community to the idea that IFRS will be the standard. Lots remains to be done to be completely ready, but that acceptance is much more than half the battle.
-- Tom Ochsenschlager, Vice president of taxation, AICPA
The profession is being pulled onto the global stage by the "perfect storm" of two of the three major forces in the marketplace -- globalization and technology (the third force is the new workforce dynamics of shortage of people and generational differences). Due to the recent SEC moves, many argue that the train has already left the station and it is just a question of when, not if. Are we ready? Absolutely not! However there are many significant activities currently underway. Here is what I believe is our current state of preparedness and what needs to be done.
1. Regulatory (SEC - PCAOB - Treasury/IRS- GAO) (red light - warning). While the Treasury (Secretary Paulson) and the SEC have set the agenda for our U.S. public companies to stay competitive in the global environment, changing over to IFRS can have significant tax consequences that may take congressional action to fix. Some reports show that IFRS income is somewhere close to 8 percent higher than U.S. GAAP and does not recognize LIFO. Not to mention that the entire U.S. tax system is based on adjusting GAAP revenue to tax basis, which would require significant changes to the Tax Code (and state tax codes as well). Imagine hitting the U.S. economy with tax increases based on changing standards and the significant impact on the U.S. manufacturing sector, which uses LIFO in most cases. I have not heard any major conversations about these issues, which makes me give this a "red light." IFRS also does not have a nonprofit version, which also has implications for the US nonprofit community. These are obstacles that can be overcome if addresses proactively.
2. Standard-setting (IASB - FASB - IFAC - ASB) (yellow light - caution) The standard-setters are busy working on preparing us for convergence. Bob Herz as FASB has taken several bold steps to make the transition easier through his latest proposed governance changes and the GAAP codification project. The ASB is also working to issue all-new standards reconciled with international standards and their clarity project is also preparing us for a transition to international. The one area that I have not heard about much is how the new funding system will work for the other GAAP standard-setters in the event major sources of funding move to support IASB. What will happen to GASB and FASAB funding if the FAF funding under SOX gets re-allocated to support IASB? Also, how will the new private company initiative under FASB integrate with proposed international standards? These questions may very well be answered, I just have not heard them, but they seem to me to be critical pieces of the convergence puzzle, which is why I gave it a "yellow" light.
3. The CPA profession (Accounting education - CPA Exam - informing, involving and educating the CPA profession) (green light) I may be a little biased here but I have already seen where we have all been collectively sounding the alarm bell about these major changes on the horizon. The AICPA with their launch of www.ifrs.com and the state CPA societies have been finding and communicating resources for CPAs in all sectors to understand and comprehend the issues around global standards. There exists a critical foundation of collaboration among the state CPA societies and with the AICPA that will make this transition as smooth as it can be. Already many states are disseminating information about these looming changes, and are beginning to find and develop training programs to be ready when these changes occur.
Let me give you an example in Maryland. We have already brought on board two nationally qualified trainers, and produced several Webcasts on how to prepare for IFRS.
I am aware of many accounting educators embracing and "going to school" on this new language and beginning to work it into curriculums. There are already textbooks published and a new exposure draft about content on the CPA Exam is addressing the prospect of international standards.
There needs to be more work on educating the most important stakeholders of this financial reporting value chain -- the investors and creditors. This is further segmented into public companies and private companies. I have not heard of a plan to address either of these two segments. We must makes sure that these users understand the new language which we will be speaking when we convert to international standards.
-- J. Thomas Hood III, CEO and executive director, MACPA
Although many individual practitioners, and some personnel within the largest firms, i.e., those working with non-U.S. based clients, are more than likely ready for the shift, the majority of the profession in the United States is not ready for a shift to IFRS as there is little demand yet by financial statement preparers to apply those standards.
With most of the thought leadership residing in Europe, and therefore within the largest firms in the U.S. who have network affiliates in this region, investments by the smaller firms, to facilitate a transfer of knowledge including training will need to take place to bring the U.S. profession to a level equal to our international counterparts. Collaboration and facilitation by organizations such as the AICPA and the Center of Audit Quality are key to progress.
-- Charles M. Allen, CEO, Crowe Chizek and Co. LLC and Crowe Group LLP
No, but it must shift! With a very short timeline between now and the anticipated go-live date for IFRS here in the U.S., most international and major CPA firms are scrambling to train their staff on IFRS. This effort will particularly hit hard many of the Top 100 Firms in the U.S. that dabble in the SEC world, but have a significant number of privately held clients. These firms will be forced to train their staff on IFRS and GAAP on a going-forward basis. Unlike the international firms that have dedicated staff for private vs. public, many of the major firms in the U.S. utilize the same staff to work in both worlds. These firms will see the greatest challenges.
-- James C. Bourke, Partner, WithumSmith+Brown
No, the profession is not yet ready for the shift, but it would not be reasonable to expect it to be ready at this point. There is much to be done to get ready by different parties, including academia, AICPA, companies, auditors, as well as analysts. However, there are precedents for this, so we do not need to start from scratch. Europe has moved to the adoption of IFRSs in the last four years and there are a lot of lessons that can be drawn from that experience. For example, advance planning is essential to making an efficient transition. So, too, is establishing a real and realistic target date and identifying the implementation hurdles to overcome.
The AICPA is already running conferences and training programs, as are some firms. This is a great start. We also need to engage academia. Academic institutions need to bring international accounting and auditing into their curricula. In addition, we need to consider the practical implications for the operations of firms and companies, including the impact on recruiting staff and training existing staff, as well as implementing new technologies.
From a technical perspective, training needs to focus not only on IFRS and their conceptual framework, but also on how they are different from U.S. GAAP.
-- Ian Ball, CEO, IFAC
While the profession should be ready when the shift actually occurs on a more broad basis in a few years, it is not ready for the shift today. There are two issues that need to be dealt with. First is education of individuals (both in industry and in public practice) and that will come from many sources -- but it will require a significant investment. The bigger issue will be gaining real-world experience. The private sector and CPA firms will both need to concentrate their opportunities to deal with IFRS in a few individuals who become the experts and who can then train and oversee others.
- Rick Anderson, Chairman and CEO, Moss Adams LLP
The profession is fundamentally prepared but there is uncertainty. As folks continue to learn about the existing differences and as they begin to feel more comfortable with less bright lines (which in turn will allow more professional judgment), I have no doubt that the profession will make the change more smoothly than some critics suggest.
-- Charles E. Landes, Vice president, Professional Standards and Services Group, AICPA
The U.S. marketplace is showing a desire for a wider use of international standards. We need to constantly think globally and be set to provide the services that international clients want. The accounting profession is preparing for the transition, but there is still a long way to go. The AICPA's IFRS.com Web site is a great start to pull this together and the institute's CPE team is working hard to help CPAs understand the implications. The academic community will need to develop a greater emphasis on international standards and reporting to educate future CPAs.
-- Mark J. Koziel, Senior technical manager, firm practice management/PCPS, AICPA
Although we are headed in the right direction, we are not quite there. Inertia is the primary issue. So, despite the advantages of moving to International Financial Reporting Standards, until a firm date is established by the SEC there is no sense of urgency and activity will remain stagnant beyond the Big Four. The numbers prove this. In the AICPA's recent survey, 55 percent of CPAs expect the introduction of IFRS to have a direct effect on their firms, yet 59 percent have not begun to prepare -- at any level -- for IFRS.
Beyond commitment by the SEC, we also need to work our way through some significant issues with IFRS, including:
-- The fact that, today, IFRS is not yet accepted consistently worldwide.
-- The possibility of maintaining two sets of books for both IFRS and GAAP for many years is not attractive to most companies. This also drives up the overall cost of conversion.
-- The question of acceptability to investors and analysts. Related to this is the perception that the standards are not as comprehensive as GAAP.
How deep IFRS reaches into organizations is also a major concern. Some of the changes may force certain behavior. One example is how a business entity prices and packages their offerings, which may negatively affect the sales force in certain situations -- like revenue recognition for software companies. Another example is the impact on companies that use LIFO inventory valuation, as IFRS does not recognize the use of LIFO.
Without the SEC mandate, there are other fundamental issues as well. Who will train our college students on IFRS? Our accounting programs are geared toward GAAP, and with few exceptions, are not yet adjusting to the new standards. Also, the measurement of qualification for the profession (the CPA Exam) has not been re-vamped to accommodate the international standards. However, the AICPA's recent draft of content updates for the CPA Exam does propose including IFRS for the first time.
On the positive side, there is some activity that will facilitate the preparation process. The Big Four are clearly starting to ramp up -- having an advantage because they currently deal with IFRS on a global scale. As such, one would expect that the Big Four would take a leading role, and all are doing so today. They are educating staff internally, working with a few major universities to assist in updating their programs, and working with their clients by educating them on what IFRS will mean.
The AICPA is taking steps in the right direction as well, such as establishing the IFRS.com Web site. The site offers a host of tools, including an exceptional video on IFRS that educates viewers on the significant differences and similarities between generally accepted accounting principles and IFRS. Tools like this will at least provide the profession with the information needed to stay informed and prepare for the move.
Currently, the biggest push appears to be coming from corporations. A recent Deloitte study showed that 30 percent of finance executives would consider adopting IFRS within three years if given the option by the SEC, versus 20 percent only six months ago. There is also the SEC's decision to accept IFRS filings from foreign companies, a clear signal that the standards used in much of the world will eventually take hold in the United States.
Bottom line: This will be a 5-to-10-year process that requires a great deal of commitment and work to prepare for the change. The SEC roadmap (to be released this summer) will drive the process.
-- Jonathan A. Baron, President, Thomson Reuters Tax & Accounting, Professional Software & Services
In general the accounting profession is ready, but there will need to be a significant emphasis on training of practitioners. Such emphasis should not occur, however, until a date certain has been established for implementation. In this way, the profession can insure its efforts are aligned with the timeframe requiring this expertise. Professional liability underwriters will also need to be assured the profession is ready for this change; otherwise the individual firms will feel their concerns in the pricing of their premiums.
-- J. Kevin McGrath, Chief operating officer, Crowe Chizek and Co. LLC, and Crowe Group LLP
-- Sir David Tweedie, Chair, IASB
Not right now, but significant planning has started in a very short period of time. Many, many things need to happen -- such as changing college curriculums and the CPA Exam; educating preparers and practitioners on IFRS itself but also in what it means to shift from rules-based standards to applying the judgments necessary to apply principle-based standards; assisting standard-setters in the convergence of U.S. GAAP to IFRS; assisting and educating regulators, analysts and other users of financial statements on the implications of the shift in standards; becoming even more active advocates of litigation reform -- just to name a few.
-- Krista M. McMasters, Chief practice officer and CEO-elect, Clifton Gunderson LLP
There is greater awareness among U.S. accountants that IFRS is coming for public companies. Most believe it will take three to five years to get ready for it. The AICPA is well positioned to help members through this process once the decision is made to adopt IFRS in the U.S.
The AICPA has long supported a single set of global accounting standards for the preparation of public company financial statements. Using a single set of accounting standards makes it easier to compare the financial results of reporting entities from different countries. But International Financial Reporting Standards are more than an accounting issue; they're a business issue. They will affect almost every aspect of a U.S. company's operations. Tax planning, investor relations, management reporting systems and employee benefit plans are just several of the areas that will be affected by the switch to IFRS.
CPAs need to be taking the steps now to understand IFRS.
The institute is educating its members about IFRS and preparing them for the transition. In May, our governing Council adopted a resolution recognizing the IASB as a standard-setter. At the same time, we launched a dedicated Web site, www.IFRS.com, to provide them with the necessary tools so they can learn about, understand and apply IFRS.
We created an eight-hour CPE course titled "International Versus U.S. Accounting: What in the World Is the Difference?" to teach CPAs the differences and similarities between U.S. GAAP and IFRS.
In the spring, we released a public proposal for content updates to the CPA Exam, which would include incorporating IFRS for the first time.
-- Barry Melancon, President and CEO, AICPA
The need to shift to the International Financial Reporting Standards is becoming clearer as the globe gets smaller by the day. Firms are doing business around the world and the necessity to unify our financial reporting is critical. It is still unclear as to how ready the profession is to handle this issue. Mentally and culturally, we are ready as a profession. However, there are many logistical challenges for firms, and the profession continues to be overworked -- and therefore struggles to find the time required for the shift. This is particularly true among smaller firms that do not operate on a global frontier. As a result, the sense of urgency or even necessity to migrate for smaller firms is lower, and the readiness is therefore lacking.
-- Glen Keenan, President, XCM Solutions and Xpitax LLC
I believe that those firms that are generally active in the AICPA and their state societies are well aware and ready for the transition to International Financial Reporting Standards. The problem exists with those firms that have not been active in the profession and apparently are being caught flat-footed by the proposed shift. It will take a good deal of pro-activity by the profession to inform what I call the "uninvolved members" in this effort. The AICPA Web site IFRS.com is a good step in this direction. The state societies should be holding conferences for their members to bring them up to date and assist them. As a profession we survived Sarbanes-Oxley and that had a much shorter lead period than the conversion to IFRS.
As the chair of the International Standards Organizations Technical Committee that promulgated international standards for personal financial planning in 2006, I know the difficulties of alerting the vast majority of practitioners to new standards. However, I also know that the accounting profession has the ability to deal with this and we will look back on the adoption of IFRS and say we met the challenge.
-- Stuart Kessler, Managing director, RSM McGladrey; partner McGladrey & Pullen
Yes, I feel the industry is ready. I believe the adoption will be gradual.
-- Mark Schlageter, President, Research & Guidance, Tax & Accounting Business of Thomson Reuters
The dialogue on the issue of international standards has been going on for some time. International accounting firms and both publicly traded and private companies have already dealt with the issues of international standards. Our educators and educational systems are already implementing course content that looks at the issues that international standards raise. The governing body of the AICPA has been focused on the issue and the AICPA has developed a portfolio of resources to enable CPAs to become familiar with the changes that need to be made.
The critical hurdle will be getting a "date certain" for the implementation of the standards changes. Corporations and firms will not be willing to invest in creating systems and the levels of training necessary to implement such a change until the standards are clear and a date has been set.
I believe firmly in the ability of the CPA profession to respond, as it always has, to significant changes in standards and regulations. The profession, which includes our CPAs serving in public practice, business and industry, government and education, as well as the professional organizations serving those CPAs, have had to adapt to massive changes that came from the Sarbanes/Oxley legislation. Those changes came with virtually no warning and the profession stepped up to meet the needs and demands created by the passage of that legislation. The resulting efficiencies in process, systems, intellectual capital and training processes will serve as an excellent learning platform as the horizon continues to advance on international standards.
-- Jeannie Patton, Vice president of students, academics and memberships, AICPA
We're not ready as preparers or consumers of financial statements for IFRS. To get to that point we'll need a lot of education across the accounting community about the objectives and meaning of adopting IFRS, and to prepare thoughtfully about the inevitable unintended consequences.
-- Kevin Parker, President and CEO, Deltek
I do think most of the larger firms (top 250) will have a fairly easy transition to IFRS. Most of these firms are sophisticated enough to have recognized the impact of globalization and are large enough to provide the technical training needed to make the switch. Smaller firms may struggle from a resource issue (having the time and money to invest in the appropriate training for staff) but will eventually get up to speed. I do believe a marketing opportunity will exist for firm to promote themselves as "IFRS-ready," which can be initially used as a differentiator in the marketplace.
-- Jeffrey S. Pawlow, CEO and managing shareholder, The Growth Partnership
As a profession we have to be ready. Business is increasingly global in scope and that's a reality that's not going to change. It's time for financial reporting to eliminate geographic differences and accept the reality of uniform cross-border standards. Where the issue becomes most challenging is when we consider the likely potential that international standards will become the norm for all financial reporting --- not just reporting for cross-border entities. That's where the greatest challenge will occur in terms of achieving consensus and agreement that this is a positive step forward for the profession and for financial reporting as a whole.
-- J. Clarke Price, President and CEO, Ohio Society of CPAs
No, the accounting profession is not ready to shift to International Financial Reporting Standards. In my opinion, the most notable reason for this stems from the fact that most accounting firms are either very locally/regionally-focused or at the very most, very U.S.-centric. In essence, a majority of U.S. firms don't take an international approach to their practices, making a shift to International Financial Reporting Standards a very large functional and technical hurdle for firms to overcome.
-- Rory Rawlings, Founder and chief tax automation officer, Avalara
The ultimate goal of a move to International Financial Reporting Standards is the rigorous application of a single set of global accounting standards, which will produce high-quality, transparent financial information to help investors and other stakeholders in the world's capital markets make economic decisions based on financial data that is easily and directly comparable. Many believe this is a necessity for a vital and growing global economy. The accounting profession in the U.S. and U.S. companies using GAAP for financial reporting are not yet ready for a move from U.S. GAAP to IFRS. U.S. GAAP is rules-based, with very detailed conventions that must be followed in keeping books of account and financial reporting. IFRS is principles-based, requiring significantly more judgment on the part of accountants and company management. What is needed is more education and training around international financial standards for the U.S. accounting profession and enterprises currently using U.S. GAAP to move to IFRS from U.S. GAAP. There needs to be more emphasis on creating curricula on IFRS in universities so that accounting students are trained on financial standards before they enter the work force. That is only beginning to happen and must be more aggressively implemented in universities throughout the country.
-- Kevin Robert, CEO, Wolters Kluwer Tax and Accounting
Absolutely not. With 99+percent of all CPA firms having no public clients, they are all asking: "Why should I do it? I don't need it and it won't help me. I'll wait until I have to do it. Besides, I'm retiring in five to 10 years, so I'll sneak by without IFRS."
I personally would like to see smaller firms adopt IFRS. But I have a hard time responding to the above questions. I would love for someone to come up with some compelling reasons, or even one reason, why firms without public company clients really need to learn and adopt IFRS.
Like so many things, new ideas are easier to sell when people see the financial benefits. Perhaps someone can think of reasons why early adopters of IFRS can differentiate themselves from the competition.
Maybe telling their clients that they are always on the cutting edge of making changes will improve their image. After all, we are in a global economy. The likelihood that a client, prospect or referral source will have international dealings increases every day. Think of all the U.S. companies we have read about being acquired by foreign companies. This is bound to impact small, local firms. As a small local firm, you don't want to be shut out in your efforts to market to new companies and retain existing ones.
Maybe telling new college graduates that their firms have implemented IFRS will give them a recruiting edge because the young people coming out of school will be schooled in IFRS. They will look at non-implementers as lethargic, old-fashioned and behind the times.
-- Marc L. Rosenberg, President, The Rosenberg Associates
The accounting profession is at the moment not ready for the shift, perhaps because there is still no firm deadline forcing a shift from GAAP to IFRS. It will require extensive training in IFRS, since it is quite a different system -- much more principles-based than the rules-based system of GAAP. The transition will be expensive, particularly for U.S. companies that do not do a lot of overseas business and will not see the immediate benefit of the conversion to IFRS. Conversion could also have an adverse impact on some financial statements, for example for companies that currently use LIFO. Once implemented, however, ongoing compliance could be less expensive under IFRS than GAAP, although auditing IFRS financial statements might be more expensive.
-- Mike Sabbatis, President, CCH
Because of the worldwide economy in which business operates, all businesses need to be on the same page in terms of financial reporting standards. The accounting profession as a whole is not yet ready for the change but it is incredibly adaptable and will make the change when the International Financial Reporting Standards become effective. Some firms and some reporting entities will adapt faster than others, but all will make the change when it is required.
-- Edward J. Dupke, Senior consultant, Clifton Gunderson LLP
The shift to IFRS has been described as more difficult than landing a man on the moon. While this may overstate the challenges, it will be a very difficult transition. Several factors contribute to this, including the lack of a timetable for public companies and the lack of any authoritative direction for private companies. The transition will involve a significant mind-set shift for preparers, auditors, users and regulators to a more "principles-based" thinking with fewer bright lines and rules. This mind-set shift will be difficult since we are used to finding answers to questions and looking for only one right answer. Investors often say they want fewer accounting choices to make comparisons between companies easier, but IFRS will likely reduce comparability.
Some larger companies are devoting significant resources to IFRS readiness, as are the larger CPA firms. However, the vast majority of companies and smaller CPA firms are not prepared and hesitate to allocate resources to an effort with unclear payback.
The profession needs several things to get ready for IFRS:
-- The SEC needs to set a definitive timetable.
-- The users of private company financial statements need to express their opinions about what standards will best serve their needs.
-- More debate is needed to raise awareness of preparers, auditors and users about the significance of the pending changes.
-- Significant education is needed for both current accountants and those entering the profession.
-- Jay D. Hanson, Chair-elect, AcSEC, AICPA
On a global basis, I believe the accounting profession is well on its way to preparing for the shift to IFRS. I would not say the same about the profession in the U.S.
I believe the following steps would help accounting professionals in the U.S. prepare for the standards convergence:
-- Standard-setting bodies, such as FASB and the SEC, will have to agree to and promote a clear, aggressive timeline and process for achieving convergence between U.S. GAAP-based standards and IFRS.
-- Accounting firms, and the associations of which they are members (e.g., the AICPA and state societies), will have to more frequently offer extensive training courses related to international financial reporting and auditing standards and to the convergence process.
-- Academic institutions will have to offer more college-level courses aimed at preparing accounting graduates to participate in careers as CFOs and auditors of multi-nationals.
-- Frank B. Arford, CEO, Horwath International
There have been suggestions that the move to IFRS will create new opportunities for financial statement fraud. The accounting profession should address that issue proactively and work to reduce the opportunity for would-be fraudsters to exploit this change.
-- Toby J.F. Bishop, Director, Deloitte Forensic Center, Deloitte Financial Advisory Services LLP
The accounting profession does need to shift to International Financial Reporting Standards to put the U.S. on the same playing field as the rest of the world will eventually be on, but we are far from ready to make this shift. First, there exists little to no training on the standards (I have yet to see any courses offered in this area). Second, I doubt there is any training in IFRS being offered in academia. Third, to effect a transition to IFRS, there needs to be an implementation plan to phase America into IFRS, which will take many years and be costly because during this phase-in period duplicate financial reports will need to be prepared, one under IFRS and one under current standards, because the investment community, the users of financial reports, will also need to be educated on the distinctions between IFRS and current U.S. standards in order to properly interpret financial reports.
To get ready, the companies providing training to the accounting and financial communities, and academia, need to get on board and provide training on IFRS. Furthermore, an implementation date needs to be established, with a phase-in period for companies to transition to IFRS.
-- Parnell Black, CEO, NACVA
The accounting profession around the world is already implementing IFRS. We have worked intensely with global companies as they have implemented and transitioned to IFRS. In the U.S., education and training are critical for a smooth transition and the profession is moving rapidly. If the SEC would establish a date certain for U.S. companies to move to IFRS, believe me, all would get ready.
Within our firm, we've made significant investments training our people and we're also working with universities and colleges. We recently formed the Ernst & Young Academic Resource Center as a way to collaborate with academic faculty and help develop curriculum and real-time learning materials to prepare the next generation of auditors for the new standards. But education is just one of the many changes that would come with conversion. Significant legal and regulatory reform is needed, not to mention respect for professional judgment since IFRS is a more principles-based set of standards than U.S. GAAP.
-- Beth Brooke, Global vice chair, Ernst & Young
I don't think the profession is ready to embrace IFRS, but I do see the beginning stages starting to form. There is awareness in the accounting industry that's helping to prepare folks for the switch. I think it's great that the AICPA has announced its partnership with IFRS. Now it's going to take the Top 100 firms to announce their support and adoption of these standards, and the requirement of continuing education classes, and even some CPE credits to move the profession to the ready stage.
-- Rene Lacerte, Founder and CEO, Bill.com
The accounting industry may get a bad reputation for being resistant to change; however, this is a profession that has mastered the process of staying abreast and ahead of change -- especially in the areas of audit, tax and technology. To prepare for the IFRS shift, the industry vendors need to develop the necessary change in workflows and processes that adopt the international standards methodologies. Additionally, accounting firms need to improve their internal training practices and build programs that educate their staff on the changes.
-- Trey James, CEO, Xcentric
Yes, I think the profession is ready for the shift, assuming that it is phased in over a reasonable period of time. Corporate accountants will need significant education about International Financial Reporting Standards -- what they require and how they differ from U.S. GAAP --to implement them. Similarly, auditors will need similar education to audit clients' implementation. The major accounting firms, professional associations and educational firms already are rolling out the necessary courses.
-- Jack Weisbaum, CEO, BDO Seidman LLP
The shift to IFRS represents a milestone in the accounting profession and provides an acknowledgement of the increasing importance of globalization in our everyday businesses. Across the profession, and certainly at Deloitte, there is no question that efforts are underway to provide an effective and timely changeover.
But that's not to say, of course, that the path ahead will be completely smooth or that there won't be challenges to overcome. From my perspective, perhaps the greatest challenge will involve how we as accountants approach the vital and necessary work that we do with greater levels of professional judgment than currently exist in a rules-based system
At Deloitte, we are executing our plan to provide comprehensive IFRS training to a first wave of 1,500 professionals. In time, all of our professionals whose work will be touched or influenced by IFRS will be trained. Equally important, we're conferring with our clients to help them prepare for IFRS implementation.
That's the short-term view. Long term, we need to work closely with the academic community to ensure that the accountants and financial professionals of tomorrow are fully versed in IFRS. To begin that process today, we've created the Deloitte IFRS University Consortium to help professors understand the principles-based rationale that is the heart of these new global accounting standards.
-- Sharon L. Allen, Chairman of the Board, Deloitte & Touche USA LLP
Clearly, CPAs firms and CPAs in business and industry will need to put in place a comprehensive training plan to be ready to support IFRS based on the SEC timetable for adoption. A number of resources will be put in place to support these education needs. One resource we recently launched for the CPA marketplace was the IFRS.com site. The overall objective of IFRS.com is to provide a comprehensive set of resources related to IFRS for accounting professionals, finance managers, audit committees, boards, investors, and other users of financial statements.
-- Erik Asgeirsson, CEO, CPA2Biz
Yes, we can meet most any reasonable challenge as a profession, although sometimes it takes a "push." The sooner we put "convergence" into place, the more influence we will have on developing a common global accounting language.
-- David A. Lifson, Managing partner, Hays & Co. LLP
No. A huge educational effort will be needed. For nonpublic companies, the problems are severe. These companies already are concerned about standards overload. Adding IFRS would be crushing.
-- Douglas R. Carmichael, Wollman Distinguished Professor, Baruch College
The key to these new standards is consistency. Anything that brings us closer to agreement on best practices for presentation of financial information brings a more stable world. With so much market pressure on management to "spin" their financial results, the accounting profession must guard against becoming unwitting facilitators of false or misleading information. Is the profession ready for new standards? Yes, but just like technology evolution, it takes time for the profession to fully adopt new best practices. The profession needs evangelists and educators who provide compelling reasons to embrace these new best practices. Small practitioners need practical information that they can implement right away, instead of utopian theories that seem to apply only to giant multi-national corporations.
-- Douglas Sleeter, Founder and president, The Sleeter Group Inc.
It will require a complete re-education of existing
professionals and a change in the curriculum of colleges and
-- William Miller Jr., President, Moore Stephens Lovelace PA
U.S. accountants may not be ready or excited about the change, but are totally capable. Leaders in the profession need to communicate why the changes are important and how firms can insure adherence. As with any change it requires leadership, education and discipline.
-- L. Gary Boomer, CEO, Boomer Consulting Inc.
We're getting there. For us to be fully ready, we need to accept the realities of rapidly changing world economies, and improve our grades when it comes to "works and plays well with others." On the other side of the coin, we must convince the rest of the world that certain higher U.S. standards, such as those with regard to public companies, are something everyone will benefit from.
-- Rick Solomon, President and CEO, RAN One Americas LLC
One of the CPA's core skills is the ability to learn new standards and adapt to changing environments. In my career, I've learned income taxes three times, stock options twice and about 100 new accounting treatments for the first time. The SEC has shown tremendous leadership in establishing a roadmap for the use of IFRS by U.S. publicly traded companies. Our members and the financial reporting system need sufficient time to get ready, and our surveys with members indicate that range is between three and five years. The key is for the SEC to set the date so that we can work toward an orderly transition.
-- Arleen Thomas, Senior vice president, AICPA
No, I think that the accounting profession in the U.S. needs to begin a period of education to aid in the shift from U.S. GAAP to IFRS. GAAP was a series of rules that needed to be followed and IFRS offers only guidelines, which will rely on an individual's own professional judgment. This will leave more room for error than when GAAP was used. Professionals need good decision-making skills enabled by appropriate certifications and professional development.
Accounting trade associations and U.S. colleges and universities need to integrate IFRS training into current undergraduate curricula and offer certificate programs to elevate the understanding of these new principles.
-- Jeffrey C. Thomson, President and CEO, IMA
Yes, actually, I do. I believe the first step to the process was the mere acceptance of the fact that the shift was coming. And I think that has happened. Obviously, the second step is to be sure our professionals are educated and trained on the standards and that we are prepared to immediately conduct business when the shift occurs. The AICPA and other organizations have done a phenomenal job of being proactive in their approach to the shift. The training is out there, all of the conferences are offering sessions that cover it and our professionals are ensuring they are receiving the training necessary to be completely prepared.
-- Jaime Trayner, President, AAM
The accounting profession is capable of managing the shift to International Financial Reporting Standards, but at this time they are not ready. To be fully prepared the profession needs to develop a plan that includes expert advice, project management, internal champions to lead this initiative within corporate America and a variable resource solution that can provide the required professionals to assist with the transition.
-- Robert L. Siegfried Jr., President and CEO, The Siegfried Group
No. The profession is not ready. Much still needs to be done.
First, it needs to continue the general effort of educating the rank-and-file members of the profession that this issue is coming and what it will mean to them in their professional lives. Second, the profession needs to develop specific continuing education programming to convey the formal training that CPAs are going to need to implement IFRS. Third, it needs to work with the academic community to make the necessary changes to the accounting curriculum in colleges and universities on this issue, so that new graduates are educated on IFRS. Lastly it needs to make necessary changes to the Uniform CPA Examination to test new graduates on these standards.
In addition, the profession needs to determine how it will be involved and provide input to the IASB and represent the members of the profession in that arena. It also needs to determine what role FASB will play and whether GAAP will continue to exist for non-public companies. Finally, the profession needs to continue to work with federal and state regulators to ensure acceptance of the new standards and processes for standards development and to be sure they do not add additional layers of regulation or impediments to uniformity.
-- John M. Sharbaugh, CEO and executive director, Texas Society of CPAs
Yes, I think it is. It is my belief that the accounting profession has the ability to quickly adapt to the demands of the international arena.
-- Michael Di Girolamo, Managing director, Investment Advisors Division, Raymond James Financial Services
-- Paul Caron, Publisher and editor-in-chief, TaxProf Blog
Yes - it is time to implement ASAP.
-- James J. Smart, CEO, Smart Business Advisory and Consulting LLC
U.S. adoption of IFRS is largely becoming a question of "when" and "how," not "if." Many in the profession are actively working to get ready for this shift. In the coming months the SEC may either set a date for U.S. public companies to adopt IFRS or release a clear roadmap which would bring a sharp focus and immediacy to the efforts needed to prepare for conversion. Similarly, it would provide U.S. companies and regulators the impetus to confront the significant legal and regulatory changes that would accompany the shift while motivating universities to train tomorrow's accountants.
-- James S. Turley, Chairman and CEO, Ernst & Young
The world continues to shrink as businesses of all types pursue opportunities in international markets. For businesses seeking diverse sources of capital to expand, the nuances of the U.S. financial reporting environment can slow this process. Much of the world uses IFRS as a commonly accepted standard, because it provides a high-quality, principles-based platform while retaining transparency, reducing complexity and encouraging the use of professional judgment.
I believe that American adoption of IFRS is not a question of "if" but "when." According to sources at the AICPA and at some of the nation's largest public accounting firms, IFRS could replace GAAP in five years in the United States. The Securities and Exchange Commission took the first step in advocating adoption by issuing a concept release in August 2007, "On Allowing U.S. Issuers to Prepare Financial Statements in Accordance With International Financial Reporting Standards." In May 2008, SEC Chairman Christopher Cox reiterated his support of the SEC's IFRS position in his speech to the International Organization of Securities Commissioners.
Is the accounting profession ready? It is certainly going to be a challenge to move from the current rules-based system to a more principles-based system of accounting. It will require a change in culture, and many are also concerned about how it will affect the profession from a liability standpoint. However, the industry can quickly acclimate itself to the new standards through commitment to the process and education on the standards and practice application. This industry's intelligent professionals can readily transform themselves when they see the need and make the commitment to change. I have no doubt that the industry will embrace the new standards, and can be instrumental in helping clients make the transition. Just as consulting and financial planning services grew from traditional accounting practices through identifying a client need and providing solutions to satisfy the need, those who are best able to acclimate will reposition themselves as adding value to the relationship and will be rewarded for their efforts. Those who are unable to make the transition will be left behind. Change represents opportunity for those who are willing to make it.
-- Roger Carlton Ochs, President, H.D. Vest Inc.
No. There is still much education necessary. Convergence will be a major issue. Will firms be required to audit under a dual set of standards? Colleges and universities also are far behind, and it will take years for them to start teaching IFRS. Firms outside the Big Four, and I might argue while the Big Four are preparing, also are well behind in creating the necessary training of their staff for convergence to IFRS.
-- Neal D. Spencer, CEO, BKD LLP
In terms of overall preparedness for a near-term transition, I would say no. The momentum to shift to IFRS is moving faster than the U.S.-based segment of the accounting industry is prepared to deal with it. The exception is the large international firms that have already had to implement and comply with IFRS, but even they will have challenges expanding the scope of its implementation to their entire client base.
In terms of what needs to be done; first and foremost a "full-court" press through the AICPA, accounting media and the CPE community to educate CPAs on the reality of the impending shift in reporting standards, the scope of the implementation and the steps required to prepare to implement IFRS. Consider this the "awareness" phase. The second step is the "technical education" phase whereby the professional associations, CPE providers and publishers develop a collection of training programs on how to effectively implement IFRS into financial reporting services within the relatively short timeline allotted. The third phase is to rapidly integrate IFRS into the college and university curriculum ASAP to bring new recruits to the profession up to current standards as they graduate. How to integrate IFRS into the CPA Exam is another issue altogether.
An important part of the "awareness" campaign is to articulate the benefits for all parties associated with a move to IFRS using the principles-based approach to financial reporting and a truly global standard.
-- John Higgins, Co-founder, CPA Crossings LLC
I do not think the accounting profession is ready to shift to IFRS -- today. However, I do feel the profession will be ready in the near future. I believe the profession will/must do the following to get ready (in this order):
1. Continuous dialogue with the membership -- at all levels of practice (there are different issues at each level of practice and size of firm).
2. Continuous dialogue with the legal community and regulators.
3. Orientation to the public -- our clients.
4. Continuous training for everyone in the profession - both technically, and the benefits for the consumer,
5. Implementation -- in five years.
-- Carl R. George, CEO, Clifton Gunderson
No! The proposed shift has not been adequately planned at this point. Although the concept of one set of high-quality global accounting standards for publicly traded companies or those who raise capital in the global capital markets makes sense, the transition from U.S. GAAP to such global standards requires substantial planning and coordination among many diverse parties that has not been accomplished to date. Currently the IASB, which issues IFRS, is not structured in a stable and sustainable manner. Its governance structure and current funding mechanisms are in need of improvement if that is the organization to set global standards. It currently relies heavily on FASB for staff and technical support.
A well-researched and thought-out transition plan should be developed and agreed upon that sets out timelines which can be communicated to all affected segments of the accounting profession, as well as to oversight and elected officials. Such a plan, among other things, needs to address: the education of current financial statement preparers and auditors regarding IFRS; revision of academic curricula and education of those who will teach new entrants to the profession as well as current accountants; revision of the CPA Exam to test for knowledge of IFRS; and working with both federal and state officials regarding the impact and potential mitigation of unacceptable unintended consequences from a shift to IFRS (e.g., numerous tax laws and regulations are currently based on U.S. GAAP).
-- Robert H. Attmore, Chairman, GASB
Few accountants could comply with IFRS today; but that does not mean the professional is not ready for a shift that includes a reasonable transition period. IFRS and U.S. GAAP are not fundamentally different. With appropriate continuing education classes most accountants would get up to speed in a relatively short time.
-- David E. Hardesty, Vice president, Wilson Markle Stuckey Hardesty & Bott CPAs
In today's global business economy, it's inevitable that there should be one uniform world standard, so we must be ready.
The process is well underway to streamline this transition, with initial work and research by the International Accounting Standards Board to determine a starting point at a reasonable cost for American corporations. By identifying the differences in the current U.S. GAAP accounting practices and the International Financial Reporting Standards, and formulating a transition plan, we are progressing toward a necessary global business standard.
In determining our company's initial compliance, I don't think there's a significant effect on Liberty's current reporting practices. Our analysis to date has not identified any significant differences.
-- John T. Hewitt, Founder, Liberty Tax Service
Yes. This is not even a question anymore. It is necessary for the accounting profession to function as business functions, and that is globally. Clients of CPA firms would benefit also, because more and more businesses are operating globally.
-- Gregory Johnson, Executive director and COO, NABA
I do not believe that the U.S. accounting profession is ready to shift towards International Financial Reporting, as most U.S. business and services that serve them are U.S.-centric in nature. From a sales tax perspective, there seems to be a group of specialized boutique firms that specialized in more than a cursory knowledge of sales tax. I believe you will see the same thing happen as more and more U.S.-based companies move towards global markets and international sales tax compliance issues.
-- Marshal Kushniruk, Executive vice president, Avalara
Yes, the accounting profession and firms like Deloitte are ramping up efforts in preparation for the eventual use of IFRS by U.S. companies.
Accountants are educating themselves on the profound changes in going to a more "principles-based" accounting system. Perhaps the biggest challenge is a cultural one. As a profession we will need to adapt to an accounting and financial reporting framework that requires more professional judgment and is less reliant on detailed rules and bright lines.
We've developed a plan to educate all of our professionals on IFRS and are now in the process of conducting detailed IFRS training. This year alone we will train around 1,500 professionals. And we're meeting with clients to support and assist them with their implementation plans for IFRS.
In addition, we recognize the need to work with the academic community in getting IFRS into the classroom. That's why we have established the Deloitte IFRS University Consortium, which is working to help academia understand IFRS so they can effectively train future CPAs and finance professionals.
-- Barry Salzberg, CEO, Deloitte LLP
The ongoing global adoption of International Financial Reporting Standards is arguably one of the most sweeping financial reporting changes in the last century. Already more than 100 countries use IFRS and I anticipate that most major countries will follow suit. The readiness of the profession to meet its responsibilities -- as well as support business and investors in their use of IFRS -- depends on the markets in question.
In Europe, where many countries have already adopted IFRS, there is significant IFRS experience. In Asia there is a growing state of readiness as many Asian countries are moving to implement IFRS via a defined timeline (usually by 2010, 2011 or 2012). Markets like China and Japan, while not yet formally adopting IFRS, are aligning their reporting standards more closely with IFRS, increasing the demand for professionals with IFRS skills.
In the United States, although the SEC does allow the use of IFRS without reconciliation for foreign registrants, it has yet to formally announce its acceptance of IFRS for U.S. filers. However, this does appear increasingly likely. If U.S. filers are allowed to adopt IFRS, it will be important for the SEC to establish a reasonable implementation timeline. A reasonable timeline would allow all stakeholders -- investors, preparers, the accounting profession, etc. -- to be appropriately trained.
Deloitte has many activities underway in support of the movement toward IFRS. For example, we have established IFRS centers of excellence throughout our network to assist our professionals and our clients on IFRS-related matters. Additionally, we have developed an IFRS e-learning program for our people and made the strategic decision to give it away free on www.IASPlus.com, a Web site maintained by Deloitte that provides a comprehensive array of information and resources about international accounting and financial reporting standards.
Well over a million downloads of our IFRS e-learning program have been completed.
In addition, Deloitte recently announced our IFRS University Consortium in the U.S. to accelerate integration of IFRS into college curriculums. Nearly 100 universities have joined this effort, reflecting the high degree of interest, and we undertaking similar cooperative arrangements in other countries as well.
-- James H. Quigley, CEO, Deloitte Touche Tohmatsu
Similar to the challenges posed with the advent of the 2002 Sarbanes-Oxley Act, I believe that the accounting profession is readying itself and will be poised to execute the shift to International Financial Reporting Standards. This practice has been on the horizon for quite some time and was expected. The true global capital marketplace increased the need for a common set of high-quality accounting standards. As more countries move to IFRS, it will be imperative for the profession to be a leader in practice and implementation.
-- Walter J. Smith, National president and CEO, NABA Inc.
Having been involved in the XBRL initiative since 2000, I have seen how difficult it is to get people to shift from their old ways of doing business. It takes a constant, concerted effort to bring about these kinds of shifts and it takes a regulatory hammer to make them happen. It really takes time for concepts to get translated into actionable steps so they can be applied. I don't think we have enough tools and concrete information available in the marketplace yet. Often we look to the software companies to help turn concepts into application. Electronic working paper products like CaseWare, since they are used at the point of financial statement preparation, have a real opportunity to help their users make the transition to these new standards by providing education and templates.
-- Geni Whitehouse, Owner, Even a Nerd Can Be Heard
There is a movement toward International Financial Reporting Standards to standardize the method of accounting and the movement appears to be gathering momentum throughout the world.
One of the major proponents in the United States for utilizing IFRS is the Securities and Exchange Commission. The SEC requested that U.S. companies provide input on whether IFRS would be appropriate for their use in the preparation of their financial statements, especially companies with international exposure. IFRS is rapidly gaining acceptance around the world. Worldwide acceptance has spurred U.S. companies to assess the potential implications of adopting the standard. Among recent developments that have heightened interest among U.S. companies are the following:
-- U.S. companies operating in foreign countries support the use of IFRS to standardize accounting.
-- The SEC is considering whether to issue a rule change this year for implementation.
-- With the rule change, it is expected that U.S. companies will have the option of using IFRS by 2010 or 2011.
-- The SEC approved a final rule in November 2007 that eliminated the requirement for foreign private companies to reconcile to U.S. GAAP.
-- IFRS is now used for public reporting purposes in over 100 countries, ranging from Australia to the United Kingdom. Others countries currently scheduled in the next few years include some of our largest trading partners such as Israel (2008), Chile (2009), Korea (2009), Brazil (2010) and Canada (2011).
-- The bottom line: By 2011, almost every country around the world could be using IFRS to some extent, including the United States.
Currently, U.S. companies that raise capital or operate in foreign countries often have to prepare multiple sets of financial statements to comply with the local GAAP of various countries. In time, it is highly probable that every company will need to address IFRS in some manner.
Is the accounting profession ready for IFRS? Not entirely, but progress is being made. To compete in the world economy, those that are not ready will have to be in short order.
-- Michael Whittle, 2007-2008 President, NATP
I do not think that the "average" practitioner understands the implications of the shift to IFRS or the potential impacts to their practice and clients it may bring. I believe that a significant communications effort that simplifies the message and identifies two to three initial first steps each practitioner should take is underway by the AICPA to message the opportunities for firm's who develop IFRS expertise, but from my camera angle, working with CPA firm leaders, this initiative is not yet on their strategic planning radar screen or part of their conversations.
-- Jennifer Lee Wilson, Co-founder and owner, ConvergenceCoaching
The increasingly global nature of our work affects even small firms in our profession. To be truly ready for the shift, the entire profession is going to have to go through a change process. At McGladrey (as national director of HR strategy implementation), I had to prepare the firm to manage large-scale change. We came to approach change as a process with clearly identifiable steps. As the profession gets ready for IFRS, we will go through this same process. The first step will have to be creating a sense of urgency about the change. Our profession's leaders will need to make the case for this shift by clearly articulating both the benefits of change, and the risks of complacency. The profession will lose some relevancy if we are not properly led through the change.
Once the reason for change is clear to everyone, the next crucial step will be creating a clear and compelling vision of a better future for our profession. Again, this is incumbent upon anyone who sees themselves as a leader in the accounting world.
-- Robert J. Wilson, Chief human resources officer, Elliott Davis
Over the past few years, there has been a great deal of effort to converge global financial reporting standards. The convergence of IFRS and GAAP rules continues, and while accountants may not be ready at the drop of a hat to deal with the changes, the benefits that standardization brings to companies, investors and accountants alike certainly makes the shift a needed effort. The change will not come without its challenges; however, the basic accounting concepts hold true regardless of whether you are talking about IFRS or GAAP. Certainly there will be a need for accountants to better understand the implication of IFRS in the work they do, and becoming familiar with a new set of rules will not be an easy task. In my opinion, the SEC, the AICPA, CPA societies and other organizations will certainly have to take a well-thought-out approach to help companies and the accounting profession gets up to speed.
-- Jill Ward, Senior vice president and general manager, Accounting Professionals Division, Intuit Inc.
The industry has made significant strides, but much remains to be done. Because IFRS presents a fundamental shift from a rules-based to a principles-based approach, firms will need to approach education differently, internally and with their clients. The industry will also have to work closely with our colleges and universities to ensure appropriate changes in their curriculums.
We recommend a four-step process to evaluate readiness for IFRS convergence:
1. Conduct an IFRS skills and needs analysis. Companies and accounting firms should look at their personnel to determine what level of knowledge and skill they have internally - and what level of training they need to effectively position their organization to deal with convergence.
2. Take a close look at management information systems. Current systems may not be set up to deliver the data that will be necessary to support convergence. At a minimum, systems will have to be modified to deliver the right data. In some cases, systems may need to be upgraded or replaced.
3. Conduct a business analysis of ramifications of IFRS convergence. Financial statement outputs serve as performance metrics used by stock analysts and lenders, and those metrics also can affect things like incentive compensation and employee benefit plans. Businesses need to understand what financial statement output changes are likely, and then work with all affected parties to equalize the impact of those changes.
4. IFRS is more principles-driven than U.S. GAAP. Executives should begin now to understand the judgment calls they will have to make, and to develop a sound rationale for making the right calls for their companies.
-- Steve Tait, President, RSM McGladrey
This is a difficult question for me to address because of our client base. Our clients are small businesses with less than 20 employees that, for the most part, deal in the service and retail sector of the economy. I do not think we will be as impacted by this shift, if and when it comes.
- Roger Harris, President and COO, Padgett Business Services
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