How Will IFRS Impact You?
| by Steve Flick | ||||
By 2011, the US Securities and Exchange Commission (SEC) is supposed to have decided if it should begin making rules for the utilization of the International Financial Reporting Standards (IFRS). The SEC has already developed a “road map” for the use of financial statements. AICPA has been instrumental in paving the way for the adoption of IFRS. By 2014, US companies are supposed to have made the switch from the use of Generally Accepted Accounting Practices (GAAP) to IFRS.
The differences between IFRS and GAAP are many and adopting IFRS — even with short- and long-term convergence projects on which the IASB and FASB are collaborating, and the ongoing guidance that these and other organizations will surely provide — will not be an easy task for American companies.
For example, GAAP and IFRS differ with respect to inventory valuation (IFRS does not permit the LIFO method) and revaluation of property, plant, and equipment (IFRS permits consideration of fair value, whereas GAAP only considers historical costs). Other areas where there are significant differences include compensation linked to GAAP financial metrics (which obviously will go away) and revenue recognition (where GAAP is more detailed, extensive, and even industry-specific). Finance, Operations, and Human Resources are just three areas where the changeover will have a significant impact. In fact, the volume of changes alone portends a great deal of difficulty for most US companies between now and 2014.
Also, because the GAAP system is so deeply ingrained in the American way of conducting business, there is concern in the US and around the world that the transition may not go well. It’s the same as with any other behavior that becomes habit: people have to implement the IFRS and people generally don’t handle change well.
There are some outside the US who fear the upcoming implementation of IFRS in the US because — they feel — the US may not “leave well enough alone”. Yet, since much of the world has already adopted IFRS, companies in the US will have to follow suit…won’t they?
What do you think? Will the adoption of IFRS in the USA go smoothly? What will 2014 look like in the field of American accountancy? What impact will the changes have on your business? What are your thoughts? Your concerns?
Categories:
Accounting Procedures • International Standards
Tags:
accounting policies • financial policies • financial reporting • financial standards • GAAP • IFRS • SEC
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Originally published in 2009 by Bizmanualz, Inc. under the title How Will IFRS Impact You?. All rights reserved. Reproduction permitted with attribution only. www.bizmanualz.com
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