Companies in about 120 countries worldwide use and support International Financial Reporting Standards (IFRS). But whether the SEC will require or permit U.S. public companies to use IFRS remains in question. That has left some American accounting departments in a bit of a quandary: Do they teach their students about IFRS?
The answer for many professors is “yes.”
“IFRS is being adopted by some of the largest countries in the world,” said Rama Ramamurthy, CPA, a teaching professor at Georgetown University and an IFRS specialist. “If you want to have relevance across international borders, you should have knowledge of IFRS. Business does not begin and end in your country.”
In addition, a U.S. accounting firm may do business with multinational clients. As Mark Holtzblatt, CPA, Ph.D., an associate professor of accounting at Cleveland State University, said, “There are so many U.S. companies that have subsidiaries overseas, and there are foreign-based companies that have U.S. subsidiaries.”
Mark Fitzpatrick, CPA, a partner at Moss Adams LLP in Seattle and a former instructor of IFRS for his firm, believes teaching IFRS is not as important as it was a few years ago, and said that students may or may not end up using IFRS in their careers. But if students “want to pass the CPA exam, they at least need some fundamental knowledge of what it is,” he said.
Professors who teach IFRS say that while accounting students may be intimidated by the prospect of learning a whole new set of standards, they realize quickly IFRS is not as daunting as they expected.
Teaching IFRS, faculty say, can also help students develop vital critical-thinking skills. “Professional services firms more and more demand new hires to think more and do it earlier in their career cycle,” said Terry Campbell, CPA/CITP, CGMA, Ph.D., a clinical professor at Indiana University. “The academic community must also embrace this need to think as universities refocus on their mission: critical thinking and communications in regards to the topic at hand.” Faculty should allow and encourage students to “embrace the inherent uncertainty and ambiguous challenges in financial reports,” he said.
But still, teaching this more-specialized subject is not easy. That’s why Holtzblatt and Norbert Tschakert, CPA/CFF/CITP, Ph.D., an associate professor of accounting at Salem State University in Salem, Mass., who also teaches a global accounting course, created TeachingIFRS.com, a website that offers free resources on teaching IFRS in the classroom. They launched the site a couple years ago after they realized how few materials were available on the topic.
Holtzblatt, Tschakert, and other faculty members offer the following tips for professors interested in teaching IFRS:
Make sure students know U.S. GAAP well before teaching them about IFRS. Beginning accounting students are in no way ready to learn about IFRS, Fitzpatrick said: The topic is best-suited “for someone who is further along in their academic career.” Once students have knowledge of U.S. GAAP, however, they will realize that IFRS and U.S. GAAP have many similarities and will likely be less anxious about studying IFRS.
Prioritize your teaching curriculum. Professors cannot possibly teach everything about IFRS in a 14-week course, so they should prioritize which topics they want to cover. Given the tight time frame, teachers should focus mostly on the differences between U.S. GAAP and IFRS, Ramamurthy suggested.
Use creative and attention-grabbing tactics. Bring in guest speakers, watch videos, and have students work on mini-cases that involve IFRS and U.S. GAAP—and then compare and contrast the two sets of standards. Classes in IFRS at Indiana University, for instance, use real standards and financial statements and usually include discussion of “a deal gone sour or a fraud where the possibility of accounting differences is involved,” Campbell said. One case Campbell uses to illustrate the application of standards is the HP/Autonomy deal, which, he said, is “infamous for the alleged differences in IFRS and U.S. GAAP which contributed to the difficulties encountered.”
Take advantage of online materials. Many sources providing valuable information on IFRS are now available online. A $20 membership in the International Association for Accounting Education & Research gets students full online access to IFRS standards. Deloitte offers IFRS e-learning modules free to anyone who registers with its site. The AICPA operates IFRS.com, which includes many videos about the topic.
YouTube is also a great resource, offering many up-to-date videos. “If instructors are simply using a textbook, they are probably two years behind the times, because by the time a typical textbook gets into a student’s hands, it may be a couple years out of date,” Holtzblatt said.
Have patience. Students may believe IFRS is not worth their time, particularly since IFRS has the reputation of being more ambiguous and less rules-based than U.S. GAAP. “It is difficult for them to understand because they come with a preconceived notion that accounting is black and white,” Campbell said. “In essence, accounting is very gray and has no precise answers. It requires critical thinking and analysis.”