Slowing Down the Move to IFRS

Regarding the move to IFRS, new SEC Chairwoman Mary Schapiro said in her confirmation hearing, "I will take a big deep breath and look at the entire area again carefully and will not necessarily feel bound by the existing roadmap that's out for comment". She said she has concerns about the timeline, the independence of the IASB and the quality of the standards.

The continued U.S. uncertainty on the move to IFRS is paralyzing, though any extra breathing room that comes from slowing down the process might be welcome news for many, especially given current economic challenges. The significance of the IFRS proposal warrants additional time to weigh - or reweigh - elements of the move towards IFRS adoption. There are well articulated arguments for and against U.S. adoption of IFRS. Both sides have merits and public comments on the roadmap should help focus the debate.

The timeline itself presents a problem. Expecting companies to invest in adoption efforts, but waiting until 2011 to make a final decision is unreasonable. There is not enough time between the decision date for moving forward with IFRS and mandatory adoption dates in the proposed roadmap. Only after the SEC is ready to move to IFRS and sets a date certain for its adoption, should it expect companies to devote resources to making the move.

Let us know what you think about slowing down the move to IFRS and the timing that is proposed in the SEC's roadmap.

- Paul Parks

Comments

[Internet Marketing Italy]

I really appreciate your professional approach. These are pieces of very useful information that will be of great use for me in future.

[traslochi intercontinentali]

Hmm, what about Slowing Down the Move to IFRS

[traslochi intercontinentali]

Good post, but have you thought about Slowing Down the Move to IFRS before?

[David R. Campbell Sr.]

The all or nothing approach to IFRS adoption in the U.S., as proposed in the Roadmap, should be reexamined, since it provides no incentive for preparers who may want to adopt IFRS to do so. It seems like large U.S. multinational firms could have a compelling case, even in today's economic environment, for a change to IFRS. Their auditors have the expertse in IFRS financial reporting and many subs of foreign based entities here in the U.S. have adopted IFRS for financial reporting purposes. Since we opened the door to foreign IFRS filings and more are coming with Canada going to IFRS in the not too distant future, I suggest the SEC consider a flexible approach to IFRS adoption here in the U.S., in the short run, perhaps along the guidelines outlined in the Roadmap for early adoption. Let the "standards market" determine whether preparers fight or switch in selecting IFRS or U.S. GAAP and for those who want to switch there should not be the penality that they may have to switch back to U.S. GAAP at a later date unless all filers are required to do so.

[Rich Jones]

I think we should proceed with an evaluation of the comments on the Roadmap proposal. The proposal suggests adoption of IFRS for public companies, not "mom and pop" small businesses or other nonpublic companies. Additionally, if adopted, where IFRS does not address a particular issue, the accountant could apply U.S. guidance, if available. Lastly, IFRS is built on a similar foundation to that used by the FASB and, the FASB and the IASB have worked closely for about 7 years to converge their guidance and to adopt a common agenda, so, IFRS will be familiar for most adoptees. Lastly, I believe it's unreasonable for the same economic transaction to receive differential reporting by companies competiting in public financial markets. Adoption of IFRS would substantially address that problem, despite some regional differences.

[Marcellinus Wendra, CPA]

We need to look objectively the cost and benefit of moving to IFRS. True, there is an upfront cost of adoption from old US-GAAP to IFRS. But remember, one can publish financial statements over a wide range of business type by using only 50 standards. While US-GAAP has 163 standards, 3 times larger. That means IFRS is more economical to maintained, less resources devoted for FASB to study, interpret and revise the standard. And also there is more room for specific information in the business area that can add value to the financial statements.

[Karl]

I like Glen's idea ",FASB and others working together on a rule by rule or principal by principal basis to come up with the highest and best standard.". However reality shows that as long as you do have two or more standard setters, they will never agree on the "highest and best standard", may be just to justify their own existence.

True, different countries may have different objectives for accounting, but basically maybe every single person in the world has different objectives. That is the reason for a standard, just agreeing on one specific way to account for a transaction. What ever standard that will be it will never be 100 % correct for each and every "similar" transaction. Accounting standard setting is about common rules, so everyone knows about the basic how the transaction was accounted for, to make it comparable. As bigger the group of people using the same standard, as better you can compare it. That is the main reason for moving over to IFRS. For long time it looks like US GAAP would be this one set of standards worldwide. Well, US GAAP made some mistakes and, in my view most important, it is just easier to bring countries to accept an "international" set of standards compared with a set of standards of any specific country.
Yes, US GAAP is already pretty much the same as IFRS,(IFRS was build on US-GAAP) however still a lot of really unneeded small differences. Lets move them away. Transition will be much less complicated as many people make you believe.

[Bernie Kortz CPA]

IFRS standards dilute GAAP.....this is a decision that should be seriously re-considered !!

[Carl Strazzulla]

I think the move to IFRS will do nothing except add lots of additional one time conversion costs for companies large and small and generate lots of fees for the consultants such as the Big 4.

Companies will not be any better off after the conversion is completed. Given the principles based concept of IFRS and our litigateous society, most U.S. companies will have to provide substaintialy more documentation to their auditors in order to justify their estimates and account balances. Auditors will then need to spend more time reviewing these estimates. The end result will be additional on going costs for companies and more on going audit fees for the auditors.

Count my vote as against being required to implement IFRS.

[Robert L. Mantz]

The question I have is - Are our clients going to be better served by us adopting AFRS? Will they have more profitable businesses? Will they have more or better information?

I would estimated that only 5 to 10 percent of the CPA's in the United States have clients that have international customers. And only one percent of the businesses in the United States will ever have international trade. Yet we want to require everyone to live by AFRS. It seems we are adopting AFRS to satisfy a few. Why not let the few that need it adopt AFRS and the rest of us continue on with GAAP as usual.

I remember in about 1992 the AICPA sent out a questionnaire to all of it's members and asked if we should adopt an international accounting standard and over 80% of the CPA's said no. Why not send out another questionnaire today and see what the membership would like to do.

It seems to me that the AICPA serves the Big Four accounting firms. And they make up less than 1% of the accounting firms in the United States. The Big four needs AFRS because of the clients they serve but the rest of do not.

[Gregory W. Beck]

My clients are not large public companies, but rather smaller "mom and pop" types. None the less, I am concerned that the change to IFRS could have wide ranging unintended consequences. Just the LIFO recapture issue should be enough to give us all pause.

In my opinion, GAAP has served us well in the US up to this point (especially for small companies). We should not 'rush to join the world' just because they are on a different standard and we want to "be like them"

[Glen]

I find it ironic that this question is only being asked after the IFRS steamroller has been chugging along for a number of years.

True IFRS is still a myth. There are numerous flavors of IFRS that have been adopted throughout the world. Various countries have been modifying or excluding particular standards to meet their own agenda. Why, I think an argument could be made that the US has already been using the GAAP version of IFRS (there are a large number of similarities aren’t there?) for quite a while. Not a good idea to formally hitch our wagon to a myth.

My all time favorite, however, has been the principals vs rules (emperor has no clothes) argument. Try to drill down into that one using a specific fact pattern that currently causes financial reporting problems under GAAP. I haven't seen or heard where anyone has actually tried to do that and uncovered a satisfactory answer. Common sense tells you that pursuing that argument doesn't lead to financial reporting Nirvana but -rather- to the land of where anything goes.

I'm 100% in support of expert world bodies like IASB,FASB and others working together on a rule by rule or principal by principal basis to come up with the highest and best standard. But let's realize that not all societies of the world adhere to the same values and laws. I'm certain there's no way that all the people of the world will ever be comfortable with a uniform level of regulatory oversight.

Also seems to me, considering a societal perspective can have an impact on the type of information that’s needed when one actually tries to "use" the financial information that's been presented. Heck, we in the US can't even make up our minds as to whether "fair value" is still the way to go. However, I'm a firm believer that we (in the US) should be the ones making such an important decision as it pertains to us. Maybe retaining some differences wouldn't be so bad.

[Stephen Waddill]

I think we should stop moving to IFRS all together. The first objective of the Roadmap is to improve the quality of accounting standards. I believe we already have the highest quality of standards. These standards have been issued by the FASB. We should not abdicate our responsibility of standard setting to the IFRS or any one else.

[Michael McMurtry]

It is critical to international commerce that the entire world be on one set of accounting standards. That one set is not US GAAP or IFRS as either stand right now. There are critical issues that both sets of GAAP need to address. While this could happen individually, it will more likely happen through the continued convergence efforts of both standard-setters. As long as progress continues to be made, I think it is best for all if the convergence continues which, should it be successful, will negate any need for the SEC roadmap.

[Lisa G. Peres]

The disallowance of LIFO will cause an increase in the tax liabities of many companies. I believe that delaying the process is in the best interest for these companies, especially in these difficult economic times.

Furthermore, because the public interest is not a concern for privately held companies, I do not believe that privately held companies should be forced to convert to IFRS at all. Bankers and other sophisitaced users of financial statements should be able to understand US GAAP.

[RON ROBBEL]

In my opinion, it is way past time for the USA to go forward with the rest of the world in developing and applying International accounting and reporting standards. Delaying the process will only make the noncomparability last that much longer. Investors are not served by public reporting under multiple standards.