Converting Your Financial Reporting to IFRS

The Securities & Exchange Commission is scheduled to decide before the end of 2011 whether US companies will be required to prepare their financial reports according to international financial reporting standards, or IFRS, rather than according to generally accepted accounting principles, or GAAP.  If the SEC takes this step — and most every indication is that it will — the largest public companies would begin reporting according to IFRS in 2014.  All public companies would have to implement the international standards at some point in 2016.  That means that large companies could begin implementing IFRS as early as 2011.

Some multinationals are in the process of switching to IFRS in their American operations.  They’ve been using IFRS in their non-US operations and financial results reporting according to a single set of standards promises greater efficiency and, therefore, less cost.  A move like this, if undertaken by many more companies in the next year or so, may make the decision to switch accounting standards easier for the SEC.

What about private companies, though?  What about companies with just a few hundred employees, or fewer?  Well, there’s been some talk (but not a lot) that small-to-medium enterprises (SMEs) — companies with fewer than 250 employees — might not be required by Federal law to use the IFRS standards.  However, market forces alone promise to exact a toll on the company that wants to stick with GAAP since commerce in some quarters has been global for decades and is becoming increasingly so in virtually every area.  We see stories all the time about small, family-run businesses eager to sell overseas.  If switching to IFRS helps them achieve their goals, they’ll use it.

The FASB and the AICPA have been working closely with the IASB in preparing for the conversion and between them and the IRS, there isn’t much enthusiasm for managing two sets of standards.  Just last week, the IASB and FASB talked about their continuing commitment to the improvement and convergence of IFRS and GAAP.  The AICPA has already developed courses so that accountants in the US can make the transition.

Small companies ought to be able to make the switch easier than public ones.  To make the conversion even easier for small-to-medium enterprises, the IASB published a slimmed-down version of the IFRS earlier this year.  Simply titled “IFRS for SMEs”, it comes in at around 230 pages, so it appears the IASB really wants to get all types of businesses (and their accounting firms) on board.

Now, my questions to you, the audience:

• Are you looking into IFRS compliance?
• Are you already taking steps to comply with IFRS?
• What are you doing to drive compliance to accounting standards?  What tools are you using or what do you plan to use?
• Which of your Accounting Procedures and Processes — as well as other processes – will need to change?
• What accounting internal control issues are most important to you?
• How can we at Bizmanualz help?

This work is licensed under a Creative Commons Attribution 3.0 United States License.

Posted by Steve Flick on Monday, November 9th, 2009 under International Standards, Strategy