Ready or Not, Here Comes IFRSJeff Tucker, CPA, Shareholder/Director of Audit Service
October 24, 2008 — 1,406 views
The move away from U.S. Generally Accepted Accounting Principles to International Financial Reporting Standards is becoming a reality more quickly than once anticipated. CFOs should start thinking now about how IFRS will affect their companies so they'll be ready when it comes.
The SEC sped up its timetable by two years when, last November, it announced that it will allow international companies to file in the United States without reconciling IFRS with U.S. GAAP or even reporting that their statements are not in accordance with U.S. GAAP.
The SEC is expected to issue a timetable soon for allowing U.S. companies to use IFRS. Still, major issues have yet to be fully addressed such as whether the quality of IFRS is sufficient, whether use of IFRS in the United States will become mandatory and whether IFRS ultimately will converge with U.S. GAAP or replace it.
Goodbye to dual accounting systems
U.S. adoption of IFRS will result in a new ease of comparability of financial information between U.S. and foreign companies. U.S. companies with foreign operations will reap another substantial benefit: They'll no longer have to maintain dual accounting systems.
Additionally, though some naysayers still fear IFRS isn't detailed and comprehensive enough to ensure sufficient reporting consistency, many who were originally apprehensive have found IFRS to provide more structure than they anticipated.
Another concern has been that, short-term, IFRS is likely to be expensive as U.S. companies make the change: It will take most companies 18 to 24 months. But, long-term, the consistency and ease of comparability that IFRS will provide should far outweigh any short-term negatives.
Timing is everything
As of this writing, there is no set timeframe for U.S. companies to be allowed - or required - to follow IFRS; however, below are some dates being discussed:
- 2011 for large U.S. companies to opt to follow IFRS
- 2013 to mandate that large U.S. companies follow IFRS
- 2015 to mandate that smaller U.S. companies follow IFRS
Start planning now
The U.S. adoption of IFRS, whether converged with U.S. GAAP or not, is inevitable and will provide many long-term benefits. Ease the transition by becoming familiar with how IFRS differs from U.S. GAAP and how it will affect your company. Our firm has the experience and expertise to help. We'd be pleased to provide you more information on IFRS and work with you to develop a plan for adopting it at the appropriate time and as cost effectively as possible.
Jeff Tucker, CPA, Shareholder/Director of Audit Service
Rea & Associates, Inc.