AICPA NATIONAL ISSUES

AICPA Spring Council Addresses IFRS

The race toward a global set of financial reporting standards took center stage at the AICPA’s 2010 Spring Council in May. The chairman of the International Accounting Standards Board, Sir David Tweedie, stressed the urgency of adopting a new set of standards that could work across continents, creating a common financial reporting language for an increasingly global market.

“Our objective is very simple,” said Tweedie, in support of all countries adopting the International Federal Reporting Standards (IFRS). “We have to come up with one single set of high-quality global standards. So it doesn’t matter whether a transaction takes place here in San Diego or Singapore or Seattle or Sydney, we get the same answers.”

Tweedie went on to enumerate some persuasive reasons for devising global standards. Efficiency would increase while time-consuming and costly pitfalls would be minimized, he said in his speech at the Spring Council meeting. The video can be seen here (7th video from the beginning).

The risk premiums associated with not understanding other countries’ methods would disappear if a universal reporting language were adopted, according to Tweedie. IT systems could be integrated, and across-the-board training would be easier. Regulation would become more reliable, consolidation more feasible, and a greater understanding of others’ accounts would help with general cross-country communication.

So far, 117 countries use IFRS, Tweedie said in his speech. More major companies currently use IFRS than U.S. GAAP.

The International Accounting Standards Board has been working with the Financial Accounting Standards Board (FASB) on the conversion of U.S. GAAP to IFRS, trying to finish most of it by the middle of next year, Tweedie explained. Tweedie’s hope is that FASB allows some companies to try it out and pave the course for others down the road.

A lot rests on the United States, Tweedie said. “If the U.S. walks away, well, we think this will explode … If it doesn’t come off this time, then I’m afraid global standards have been lost for a generation.”

Tweedie acknowledged the AICPA’s role in helping members and professionals keep up-to-date and find information on IFRS through the website IFRS.com.

The Spring Council meeting also addressed a recent survey about IFRS conducted by the AICPA. According to the survey, CPAs in the U.S. are gaining an understanding about IFRS and increasingly foresee a need to gain advanced or expert knowledge as the U.S. moves toward global accounting standards over the next three to five years.

Forty-seven percent of CPAs in the survey conducted April 20 to May 7 said they already have basic knowledge of IFRS (up from 39 percent in October 2008). Twenty-four percent say they expect to need “advanced” knowledge of IFRS in coming years.

Forty-two percent of respondents said the SEC should ultimately require adoption of IFRS for U.S. public companies, but only after more convergence of U.S. GAAP with IFRS. Another 18 percent support U.S. adoption completely. Only 6 percent said IFRS should not be mandated or allowed for use by U.S. issuers.

2011 will be an important juncture, as it’s when the SEC will decide whether to set a future date for U.S. companies to adopt IFRS instead of using U.S. GAAP.

“Similar is not enough,” Tweedie said in his Council speech, emphasizing that working simply to converge the two systems cannot continue indefinitely. At some point, a choice will have to be made either to adopt IFRS or drop the transition entirely.