We do need a single set of global, high-quality financial reporting standards.
The question is, how can we get them and implement them in the largest capital market in the world — the United States?
There are six major barriers to IFRS progress in the U.S:
- Other more urgent priorities: We have all heard about the tyranny of the urgent (over the important). FEI's recent survey of issues facing U.S. corporate finance chiefs put IFRS fifth behind economic recovery, health care reform, employee benefits and regulatory reform.
- Costs of convergence in a tough economy: Many early adopters have reported costs of converting to IFRS similar to SOX 404 costs, and companies simply cannot afford extra costs in this fragile economy.
- Mixed messages from regulators: The on-again, off-again, on-again messages from regulators add major uncertainty to companies trying to plan when they should start their focus and project planning. The SEC promised a “road map” by winter, and we are still waiting for direction.
- Big, unresolved financial reporting issues: LIFO, tax, and the added litigation risk of moving to principles-based standards for both preparers and auditors have not been addressed.
- Convergence conflict: Significant differences exist between GAAP and IFRS and have not been decided or agreed to yet. The goal of better information for investors and less complexity is the right answer. The fear is, are we in a race to the lowest common denominator or do we have to wait until the IASB-FASB convergence project is complete before a decision to convert is made?
- Private company standards continue to raise questions in the U.S. The Private Company Financial Reporting Committee and the new Financial Accounting Foundation Blue Ribbon Committee are moving in the right direction. IFRS for SMEs is also gaining adoption and has some great concepts that many small enterprises support. The question is, can we get these to come together quickly before the demand for a set of standards for private companies finds its own solution?
What do you think? Is it time to get moving on IFRS or not?
Resources:
- Latest guidance on IFRS for SMEs (from the MACPA, with related upcoming training programs)
- Podcast with Judy O'Dell, chair of the FASB's Private Company Financial Reporting Committee
- AICPA IFRS resources
- IASB Web site
- CPA Success posts about IFRS