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As the IFRS World Turns – & continues turning. . . .

April 21st, 2009

     It’s been quite a few months since I’ve touched on the topic of the pending IFRS conversion. I’ve just continued watching from the sidelines as to how it would develop as the entire global finance system worked its way through the existing meltdown.  Since I had the “luxury” of working through an full-length IFRS conversion during my time with a France-based company, I was provided with a great insight as to the merits, and difficulties, of such a conversion.  Through the majority of my posts during Q2/Q3 of last year I discussed the significant challenges U.S. companies would have going through such a conversion and whether the U.S. was truly prepared to cast aside a financial reporting structure that had been developed over decades, rigid in it’s application, for a system that was principles-based and open to the interpretations of those applying the “Standards”.

     Interestingly enough, the discussion boards are heating up to call for the SEC to discontinue its mandate of having U.S. companies adopt IFRS. In a recent article on CFO.com, finance executives have “cited concerns over whether the U.S. legal culture and auditors could handle a more principles-based accounting language, getting their staff up to speed on IFRS, the integrity of the IASB, and whether the international rules are truly bettern than U.S. GAAP”.  Some are arguing “that an outright adoption of IFRS, rather than convergence, may be a better route”. I will still take the position that while the current structure of IFRS is a quantum leap over what previously existed before, it is not strong enough to outright replace the U.S. GAAP system. 

     As in my posts from last year, there are still a number of questions that have yet to be answered, and are even more relevant now considerating the developments of the financial markets over the last year.

-Are we really prepared to enter into a 3-year moratorium on new accounting standards to work through the conversion? (consider that most significant changes in standard are born out of crisis…)

-Does the IASB have enough ful-time, technically capable, and independent staff members to support a broad-based U.S. conversion effort?

-What is the U.S. education / university system doing to bolster the number of qualified graduates with the proper IFRS knowledge base?

     There are countless questions which need to be addressed, which are over and above those centered around a comparison of the two reporting platforms and how they will be enforced. I have not read about these questions being addressed and would like to see articles quantifying the developing support in each of these areas.  With all this said, while I don’t believe that we are realistically looking at a conversion window in the near-term, I’m certainly going to continue keeping my IFRS knowledge up to date with any developments happening across the pond.

Thanks for reading . . . .

Jeffrey Ishmael

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