What’s the fuss about IFRS?
A lot of CPA’s right now are wrapped around the axle with tax returns and preparing client financial statements. They might say, why do we need to be concerned with IFRS? In thinking about that question I started digging to provide some basic education on IFRS and the potential impact it could have on CPA’s across the country. The SEC created a roadmap for adopting international accounting standards know as IFRS by 2011 and mandating it by 2014.
IFRS accounting standards have been adopted by 113 countries and by 2011 it will be the standard used by 150 countries. The United States is immersed in global business, and investors need to have the ability to evaluate investments around the globe. This makes a pretty good case for a single set of globally accepted accounting standards. As was the case with SOX, CPAs are not yet prepared to shift to IFRS. Because of the global implications, CPAs in the United States will need to be capable of preparing and interpreting financial statements using IFRS.
The education process will be massive. It will impact investors, CPAs, and other specialists such as actuaries, and professional associations. Comprehensive education programs will be needed across the board. The AICPA has launched an initiative to help educate and pave the way for 2011 when conversion will likely be a reality.
The IASB issued a draft accounting standard on IFRS for smaller companies. We have heard about big GAAP and little GAAP. Since the IASB is a recognized standard setter, smaller companies could consider adopting this standard creating a direct impact on CPAs servicing companies that might consider this standard. CPAs who understand IFRS could put themselves in a unique position to expand their practices in unique ways. These practitioners will be on the cutting edge of leading the transition to IFRS. Being in a leadership position will enable these firms to effectively guide companies making the conversion and to assist with the education process.
In drafting this post the potential impact of the transition became starkly real to me. The education effort will be massive. Colleges and universities will need to revise their curricula to accommodate the new standards. The CPA exam will need to be revised. Many CPAs could find themselves in situations where clients will demand adoption of IFRS. The CPAs who make the effort to educate themselves will be on the winning end of the conversion game. My prediction is there will be more unprepared accountants than those who successfully make the leap.
The transition to IFRS will create a huge paradigm shift. Whether we agree or not, U.S. GAAP is doomed to be converted because the rest of the world isn’t going to accept it. Financial statements will look different and a lot more disclosures will be required. It makes sense to start thinking about training and how long it might take. Getting on the band wagon sooner rather than later could put first adopters in the driver’s seat. Embracing the change makes sense. Since I put my toe in the water, I will expand further on the IFRS issue to help provide ideas on what to expect down the road and how to get started with education.
Lynn Northrup, CPA, CPIM - Lynn's focus is on building business value for both family-owned businesses and other CPAs. I also specialize in lean accounting, process improvement, internal control, and assessment of audit risk. Other accomplishments include publishing two books, development of self study programs for Bisk Education, and an Adjunct Professorship at Villanova University. My wife Jessica and I live in southwestern Colorado and we look forward to contributing to the AccountingWEB community.