Rick Telberg
Ron Box

AICPA Survey Shows Growing IFRS Support

Once the timing of IFRS convergence is clarified, IFRS preparation in the form of in-depth training and information technology readiness will be especially important.

November 4, 2010
by Ron Box, CPA.CITP

The AICPA Council issued a press release on October 18, 2010 highlighting the results of its fall International Financial Reporting Standards (IFRS) Readiness Survey. One benefit of International Financial Reporting Standards (IFRS) is that it provides a common global understanding for reporting of financial results rather than the mix of accounting regulations generally used throughout the world. The debate surrounding adoption of IFRS in the U.S. has been alternatively hot and cold over the past couple of years.

Currently the U.S. Financial Accounting Standards Board (FASB) sets accounting standards that are used by U.S. public companies. The U.S. Securities and Exchange Commission (SEC) has stated that it supports continued convergence of U.S. Generally Accepted Accounting Standards (U.S. GAAP) with IFRS. The SEC announced a work plan that will help it decide in 2011 whether or not to incorporate IFRS into the U.S. financial reporting system for U.S. issuers and if so, when and how this process will unfold. In part because of the protracted decision by the SEC on whether to mandate adoption of IFRS, CPAs have taken various positions regarding migration to IFRS. Some believe that IFRS adoption will never occur in the United States while others are convinced that adoption is inevitable.

AICPA IFRS Readiness Survey

The AICPA October 2010 IFRS Readiness Survey detailed in the October 18, 2010 press release, shows a wide range of IFRS readiness and IFRS preparations by respondents surveyed. “Our latest tracking survey shows CPAs in the U.S. are increasingly aware of International Financial Reporting Standards but significant numbers are waiting to invest more resources in international standards until they see a clear signal from the Securities and Exchange Commission about future U.S. adoption,” said Arleen Thomas, AICPA senior vice president for member competency and development. “CPAs are also watching the FASB-IASB convergence progress very closely, according to our focus groups.”

“A majority of members, 63 percent according to the survey, believe a 2015-2016 adoption target would allow enough time for implementation, if the SEC decides in 2011 to require IFRS at a future time. Members are split about pace of change for FASB-IASB convergence; 37 percent said it’s too fast, 33 percent said about right, and 25 percent were are unsure. Less than five percent said they think it is too slow.”

A comparison of five IFRS Readiness Survey results from the fall of 2008 to the fall of 2010 is available on the AICPA website.

Why Convert to IFRS?

IFRS is currently used in many parts of the world and it allows a common financial language to be used in discussing business performance. The ever-increasing move to globalization in commerce makes IFRS a beneficial consideration for companies that have foreign segments or intend to acquire foreign operations.

IFRS/U.S. GAAP Differences

Adoption of IFRS requires changes in many areas of accounting rules and financial statement presentation. A few of the differences between U.S. GAAP and proposed IFRS requirements are:



LIFO not allowed

LIFO allowed

Reversal of inventory write-down required if value increases

Reversal of prior write-down prohibited

Reversal of asset impairment permitted

Reversal of asset impairment not permitted

Revaluation of PP&E to Fair Value allowed

Revaluation of PP&E to Fair Value not allowed



Components of an asset with different patterns of benefits must be depreciated separately

Component depreciation permitted, but not required

Deferred tax asset always non-current

Deferred tax assets based on related asset or liability

More than one presentation currency allowed for financial statements

Only one presentation currency allowed for financial statements

IFRS vs. US GAAP Information Technology Issues

Generally, every change in the conversion of U.S. GAAP to IFRS will require an adjustment of some magnitude to existing information technology support systems. Changes in calculations, valuation adjustments, currency issues and more detailed financial statement presentations reflect a few of the technology issues that must be considered. Changes in the chart of accounts, calculation bases and rates and supporting systems are a few of the IT issues that must be considered. In addition, a dual-reporting system supporting a financial statement comparison of U.S. GAAP to IFRS may be required during the first year after IFRS adoption. Under this requirement, the IT system will need to support two reporting schemes at once during this period.

Information technology conversion costs are expected to be a significant portion of the total costs to migrate from U.S. GAAP to IFRS. Very detailed planning will be required to ensure that the IT systems of a converting business will support all of the accounting change and reporting requirements.

Impact of Mergers and Acquisitions on IFRS Adoption

As business has become more global in nature, the prospect of a U.S. company merging with or acquiring a foreign company already using IFRS has increased. Conversely, the possibility of a U.S. company being the target of a merger or acquisition by a foreign company using IFRS also must be considered. In either event, the acquiring company will need to translate financial presentations using IFRS. Companies involved in foreign mergers and acquisitions of this type will need to convert existing information technology systems to support IFRS. The due-diligence phase of a foreign mergers and acquisition (M&A) process will require a detailed understanding of IFRS and the IT systems that support IFRS-based reporting.

IFRS Convergence

The AICPA Readiness Survey indicates an increased acceptance of IFRS as a reality, but reluctance to invest heavily in IFRS preparation without more guidance from the SEC. In February of 2010, the SEC issued a statement on IFRS convergence and global accounting standards saying, “By 2011, assuming completion of these convergence projects and the staff's Work Plan, the Commission will decide whether to incorporate IFRS into the U.S. financial reporting system, and if so, when and how.” (SEC press release, February 24, 2010, Washington, DC.) A definitive statement from the SEC in 2011 will remove a great deal of uncertainty from the IFRS-conversion process and allow businesses to intelligently invest in IFRS resources. Once the timing of IFRS convergence is clarified, IFRS preparation in the form of in-depth training and information technology readiness will be especially important. Failure to adequately prepare for IFRS convergence could prove to be very expensive.

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Ron Box, CPA.CITP, CFF, CISSP, is the chief financial officer and chief information officer for Joe Money Machinery, a Birmingham, AL.-based regional heavy construction distributor with operations in Georgia and Florida. Ron also serves as chair for the 2010 AICPA Top Technology Task Force and is a member of the AICPA Certified Information Technology Professional (CITP) Credential Committee.