CPAs need to prepare for International Financial Reporting Standards

Dated June 10, 2008

Acceptance of a single set of high-quality accounting standards for worldwide use by public companies has been gaining momentum around the globe for the past few years.

Outside of the U.S., more than 12,000 public companies in nearly 100 countries have adopted the use of International Financial Reporting Standards (IFRS). In 2005, the European Union began requiring companies in its member states whose securities are listed on an EU-regulated stock exchange to prepare their consolidated financial statements in accordance with IFRS. In addition, Australia, New Zealand and Israel have essentially adopted IFRS as their national standards. Canada plans to require IFRS for publicly accountable entities in 2011. The Accounting Standards Board of Japan and the IASB also plan convergence by 2011.

“It’s no longer a matter of if but when – and that time is sooner rather than later,” says Betsy Adrian, President of the Minnesota Society of CPAs. “All signs point to a date-certain for IFRS for U.S. public companies being pinned down later this year. It’s time to get ready.”

The growing acceptance of IFRS as a basis for U.S. financial reporting could represent a fundamental change for the nation’s accounting profession, comparable to the enactment of the Securities Exchange Act of 1934 that created the SEC. CPAs need to prepare for the changes ahead as the Securities and Exchange Commission (SEC) has taken steps toward adoption of IFRS.

In February 2006, SEC Chairman Christopher Cox reaffirmed the Commission’s commitment to a “roadmap” toward one set of high quality, globally accepted accounting standards. In November 2007, the SEC voted to accept from foreign filers in the U.S. financial statements prepared in accordance with IFRS, as issued by the International Accounting Standards Board (IASB), without reconciliation to U.S. GAAP. Later this year, the SEC staff will formally propose to the Commission an updated roadmap that lays out a schedule, and appropriate milestones on which the schedule will be conditioned, for continuing the progress that the U.S. is making in moving to accept IFRS in this country. In anticipation of this action, the AICPA governing Council at its May meeting voted to recognize the IASB as an international accounting standard setter, which would allow CPAs to state in their reports on financial statements prepared in accordance with IFRS that those financial statements are prepared in accordance with GAAP.

According to a recent survey conducted among AICPA members, awareness of IFRS is high but understanding is uneven. Similarly, while a small percentage of firms and companies have begun preparing for potential adoption of IFRS, most have not begun to take steps to get ready. Public companies in the U.S. are just beginning to grapple with the transition to IFRS, but private companies may also be driven in that direction by market forces.

The profession is committed to helping CPAs with the transition and working with regulators to ensure an orderly process. Ongoing efforts will include working with the Financial Accounting Foundation to develop a comprehensive project plan for an effective transition; educating CPAs about IFRS; working with accounting educators, textbook authors and educational institutions to prepare future professionals to use IFRS; making certain the voice of CPAs is heard internationally; and incorporating questions about IFRS into the Uniform CPA Examination.

Helpful resources

A comprehensive Web site (www.ifrs.com), developed by the AICPA in partnership with CPA2Biz, was launched on May 15 to help CPAs get acquainted with IFRS, the surrounding issues and available support.

Resources on the site include:

• A backgrounder, including a brief history of convergence and a high-level overview of the differences between IFRS and U.S. GAAP, as well as FAQs.
• Articles on IFRS
• Textbooks and CPE courses
• Links to the summaries of IFRS and International Accounting Standards
• Assistance for audit committee members
• Request for volunteers to help shape the profession’s move toward IFRS

Watch for ongoing communications on this critical issue. All CPAs need to begin to prepare for the changes ahead.

Upcoming IFRS courses

	International vs. U.S. Accounting -- What in the World is the Difference?	Oct. 9, 2008 Bloomington, MN	8 CPE credits
	International vs. U.S. Accounting -- What in the World is the Difference?	Feb. 10, 2009 Bloomington, MN	8 CPE credits