Opinions are still mixed about the coming international financial reporting standards, or IFRS, but for those who are less than enthusiastic, it may all be over but the crying. Before summer is over, the final rules are expected to be written in stone. IFRS are set by the International Accounting Standards Board in London, the equivalent of our FASB in Norwalk, Connecticut.
Barry Melancon, president and CEO of the AICPA said that momentum for the IFRS is building and most of the AICPA members he has talked to just want to get on with it the process. In a June speech at Baruch College in New York City he said that while not everyone is happy about the change, they seem to have accepted the inevitability and now they are anxious to see what the final rules will be so they can plan the steps they need to take.
The biggest question on the minds of most AICPA members seems to be the timeframe for adopting the new rules. Based on a poll of members, the expectation is that it will take three to five years to fully implement the changes brought by the IFRS. For private companies, the phase in period is expected to be longer, possibly five to ten years (though this will fall under banking regulations, rather than SEC rule).
While we wait for the final rules to be issued later this summer, interested parties want to know if the SEC will allow early adoption of IFRS for those who wish to do so. Last year, the SEC permitted foreign public companies to issue financial statements using IFRS instead of GAAP. Now they are considering whether or not to let U.S. firms use a phased-in approach to IFRS, adopting the new rules before they become mandatory. One possibility is that firms will be allowed to adopt the IFRS early, but will be required to reconcile financial statements to GAAP. This requirement to reconcile will pose a disadvantage to those firms, but not reconciling could lead to confusion among investors, who may already have a hard time comparing financial statements that use a variety of accounting treatments under GAAP. The expectation is that, if a requirement to reconcile is established, it would be short-lived.
What Areas Are Scheduled for Change?
Frank Ng, commissioner of the large and mid-size business section of the IRS says that among the many tax policy issues that will need to be addressed before the final rules can be set are such things as changes in valuation, revenue recognition, and LIFO accounting. Securitization rules are another area where there is likely to be adjustment, in addition to the recent FASB changes to off balance sheet accounting which brought U.S. and international standards into closer alignment.
To help members monitor the status of the IFRS, the AICPA has created a new Web site in partnership with its subsidiary CPA2Biz. IFRS.com features videos, training programs, and explanatory materials to answer member questions.