Convergence of International and US Accounting Principles and IFRS
In response to worldwide demand from regulators, investors, businesses, and auditing firms for a single set of high-quality, globally-accepted accounting standards, more than 100 countries currently allow publicly-held companies to use International Financial Reporting Standards (IFRS) set by the International Accounting Standards Board (IASB) in London.
The AICPA believes U.S. adoption of a single set of high-quality, globally accepted accounting standards will benefit U.S. financial markets and public companies by enabling preparation of transparent and comparable financial reports throughout the world. The AICPA is committed to providing the accounting profession with the information and tools, such as the Web site IFRS.com, needed to assimilate and implement a new set of standards.
The AICPA is engaged in a healthy debate at the Securities and Exchange Commission over the best way for the U.S. to adopt such standards, if applicable. Based on member surveys, the Institute believes that a three- to-five-year timeline will be required for public companies and the accounting profession to successfully transition to IFRS. As a result, the AICPA has urged the SEC to set a “date certain” for any future IFRS adoption provided that certain key milestones are achieved.
In the meantime, the AICPA supports continued “convergence” of specific accounting standards between IFRS and U.S. generally accepted accounting principles with the goal of substantial completion of work between the IASB and the Financial Accounting Standards Board (FASB) during 2013; a goal supported by the G-20.
The AICPA further supports a permanent, independent funding mechanism for the IFRS Foundation, the governing body of the IASB. The AICPA encourages the SEC to use part of the current levy on U.S. public companies for accounting standard setting activities as a U.S. funding contribution to the IASB.
The Securities and Exchange Commission has statutory authority over accounting standards used by companies whose shares are publicly traded on U.S. exchanges such as the New York Stock Exchange and the NASDAQ. In 2007, the SEC approved use of IFRS for U.S. financial reports filed by foreign publicly-held companies that use IFRS in their home country. The SEC took a first step toward allowing all U.S. public companies to use IFRS in early 2008 when it proposed a draft roadmap and timeline with key milestones for adopting IFRS. The SEC met on February 24, 2010, voting to issue a statement of its position supporting IFRS and convergence of U.S. and international accounting standards, and directing the staff to execute a Work Plan to assist the Commission in evaluating implementation of IFRS by U.S. companies. On July 13, 2012, the SEC issued its Final Staff Report on the Work Plan which did not provide a recommended course of action. The final decision regarding whether to incorporate IFRS into the financial reporting system for U.S. issuers now rests with the SEC Commissioners. There is currently no estimated date for when such a decision will be made.
IFRS for Private Companies
The International Accounting Standards Board (IASB) released its International Financial Reporting Standard for Small and Medium Entities (IFRS for SMEs) geared toward non-public company enterprises that in the U.S. are generally referred to as private companies. IFRS for SMEs is a self-contained global accounting and financial reporting standard applicable to the general-purpose financial statements of and other financial reporting by these entities. It is a modification and simplification of full IFRS aimed at meeting the needs of private company financial reporting users and easing the financial reporting burden on private companies through a cost-benefit approach. The AICPA governing Council recognized the IASB in 2008 as an international accounting standard setter, giving AICPA member CPAs the option of using and auditing IFRS or IFRS for SMEs for private companies.
International Financial Reporting Standards are accounting standards developed by the International Accounting Standards Board that are becoming the global standard for the preparation of public company financial statements. The IASB is an independent accounting standard-setting body that is the international equivalent of FASB, which sets U.S. generally accepted accounting principles. Like the FASB, the IASB follows a rigorous, open due process to develop standards and cooperates with national accounting standard setters around the world.
The IASB consists of 15 members from nine countries, including the United States. It is funded by contributions from major accounting firms, private financial institutions and industrial companies, central and development banks, national funding regimes, and other international and professional organizations throughout the world. The IASB is governed by the IFRS Foundation.
The AICPA publishes the Web site www.ifrs.com, the premier source for IFRS news and resources in the United States. The AICPA has developed a variety of courses, publications, articles and case studies to help Americans learn about IFRS and understand the changes, challenges and opportunities that a U.S. transition to IFRS will bring.
For more information about IFRS, visit www.ifrs.com. Among other items, a list of frequently asked questions explaining IFRS and its applicability in the United States is available.
SEC Final Staff Report on the Work Plan for the Consideration of Incorporating International Financial Reporting Standards into the Financial Reporting System for U.S. Issuers, July 13, 2012