| In as unsure of economic times as the one | | | | businesses and the SEC’s proposed plan in her |
| we’re living in today, it is only natural for people | | | | article titled “Guessing the Costs of IFRS |
| to desire some additional consistency and reliability, | | | | Conversion”. Sarah states, “In its proposed |
| principally relating to the business world. In the world | | | | plan to move all U.S. publicly traded companies to the |
| of accounting these two factors are imperative in | | | | global standards, the SEC also predicted that the |
| order for firms to perform daily business operations. | | | | largest U.S. registrants that adopt IFRS early would |
| Due to the ever-changing anatomy of business and | | | | incur about $32 million in additional costs for their first |
| the pull towards globalization companies must | | | | IFRS-prepared annual reports” (Johnson). She |
| conform to more internationalized standards than | | | | also makes note of comments made by one of the |
| ever before. Companies using the current Generally | | | | leading global management consulting companies, |
| Accepted Accounting Principles in the United States | | | | Accenture, about their take on the degree of |
| are being pressed to convert to these international | | | | difficulty involved in performing the IFRS conversion |
| standards set forth by the International Accounting | | | | and its comparison to European conversion. In their |
| Standard Board by 2014. There are, however, some | | | | statement they mention: |
| encumbrances for many corporations to deal with if | | | | For one, U.S. companies will have to run GAAP and |
| they are to transfer over to widely used | | | | IFRS simultaneously under the SEC’s plan and in |
| International Financial Reporting Standards. These | | | | order to meet statutory and regulatory requirements |
| hindrances may prove to be combative of the | | | | outside the SEC’s purview, such as for filings |
| potential 2014 mandatory adoption the SEC had set | | | | made with the IRS. In addition, the European |
| during its meeting in late 2008. As the convergence | | | | experience is viewed to have been a bit easier |
| of the United States GAAP and IFRS continues to | | | | because the countries’ accounting rules were |
| progress it will ultimately become essential for U.S. | | | | fairly similar to the principles-based IFRS, whereas |
| corporations to fully adopt and administer these | | | | GAAP is considered more rules-based, or prescriptive. |
| regulations in order to keep up with the world’s | | | | (Johnson) |
| changing economic and business climates. | | | | Some supporters counter these higher priced |
| Much of the reason for the Securities and Exchange | | | | accusations with the fact that they believe a |
| Commission to propose a US adoption of IFRS is | | | | company who does not adapt to international |
| simply to create a uniform accounting system that | | | | standards may actually be paying more than one that |
| can be applied throughout the world. In terms of the | | | | has adapted to the new set of standards. There is |
| 2014 date set for the adoption by US-based | | | | no doubt that this transition will be an uphill climb but |
| corporations, it is merely a tentative date and nothing | | | | ultimate goal is within reach. |
| definitive is on the agenda at this period in time. In its | | | | “There is a clear trend toward adopting IFRS as |
| document, Roadmap for the Potential Use of Financial | | | | the single body of internationally accepted financial |
| Statements Prepared in Accordance with | | | | reporting standards. In the next few years, |
| International Financial Reporting Standards (IFRS) by | | | | thousands of companies will move to IFRS as a |
| US Issuers, the SEC set milestones that they will | | | | primary basis of financial reporting” (Gannon). |
| assess in 2011 in order to establish mandatory | | | | There are clear and prominent factors that point to |
| adoption date. These milestones include the following: | | | | the fact that transitioning from US GAAP to IFRS, |
| Achieving sufficient improvements to IFRS, enhancing | | | | and including a full blown conversion, is almost now a |
| the independence, accountability and funding of the | | | | necessity in the United States. Whether it is directly |
| IASB and its Trustee Organization, achieving sufficient | | | | or indirectly, most US companies are affiliated with |
| progress on the taxonomy for XBRL compatibility, | | | | international firms. “Some [US companies] may be |
| and sufficient improvement in IFRS education and | | | | required to adopt IFRS to meet the reporting |
| training in the US ("IFRS Reporting: Current Situation | | | | requirements of an international parent or investor |
| and Next Steps"). | | | | company, while others may recognize the need to |
| This proposed roadmap has not gone by without its | | | | voluntarily supplement their current financial reporting |
| share of criticism, however. In her article that | | | | with IFRS to allow for an accurate comparison with |
| highlights the resurgence of the IFRS debate, Maria | | | | foreign competitors” (Gannon). In addition, there |
| Leone addresses the main concerns that were given | | | | already have been several efforts to unite the US |
| briefly after the 2008 SEC meeting by the premier | | | | GAAP and IFRS, including IASB’s attempts to |
| opponents of the IFRS conversion deadline. Their | | | | publish numerous statements that narrow the gap |
| apprehensions involving the deadline included the | | | | between the two accounting standards. Along with |
| following: | | | | these aspects US companies that are subsidiaries or |
| Training U.S. accountants and auditors by the | | | | own subsidiaries in foreign countries may also be |
| proposed 2014 deadline would be impossible; | | | | required to use IFRS along with their regular |
| the SEC would cede its regulatory power to a global | | | | standards. And finally, if a US company maintains |
| regulator; the standard-setter that wrote the rules | | | | foreign investors it is also likely they would need to |
| – the International Accounting Standards Board | | | | release information according to IFRS. |
| – would buckle under political pressure; and | | | | From the pressures of foreign companies to |
| compared with U.S. generally accepted accounting | | | | domestic inefficiencies the conversion is all but a |
| principles, IFRS is weak and would therefore invite | | | | certainty. It is just a matter of when and how US |
| accounting abuse. (Leone) | | | | corporations are going to adapt and stay afloat |
| To go along with the previously mentioned | | | | during this transition period. International Financial |
| weaknesses is the pure financial aspect of the | | | | Recording Standards will soon be uniting the United |
| conversion. Businesses stand to shell out a significant | | | | States with the rest of the world in creating a new |
| amount of money in order to transfer over to | | | | and integrated system for the business and |
| international standards during that first year. Sarah | | | | accounting world alike. |
| Johnson comments on the initial costs of US | | | | |