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IFRS: Misaligned SEC / AICPA Priorities . . . .

May 15th, 2009 Comments off

While I usually try and remain neutral and stay with the facts as it relates to accounting topics, I read a press release yesterday, which absolutely left me shaking me head with respect to the planned adoption of IFRS reporting in the U.S.  I have posted quite a few entries regarding this area and have my doubts that we are moving towards a successful implementation of these standards in the U.S. and this doubt was further reinforced after the AICPA press release from yesterday.

 

                Keep in mind that the schedule is still in flux as key business representatives are pushing for a delayed adoption of IFRS, but let’s assume that we are going forward with the SEC adoption date of mandated phased-in adoption starting in 2011. With this in mind, the accounting profession, who will be required to provide professional guidance, and my colleagues in the corporate sector, need to already be training on these standards and planning system reporting calendars for adoption.  It will not be as easy as “flipping the switch”. In fact, we ran IFRS reporting parallel to our GAAP reporting for two quarters before fully converting.  Back to the preparation though for IFRS – below is a sampling of statistics from yesterdays IFRS press release:

 

When asked to rate their level of familiarity with IFRS:

a.  36% responded they “want” Advanced or Expert knowledge

b.  24% responded there is a need for “some” knowledge.

c.  21% responded they require a “Basic” knowledge.

d.  There was no info reported on the missing 19%.

 

The AICPA further reported that “CPA’s are still evaluating their business & client needs”.   Really? What is there to evaluate on the “needs” front when the SEC is looking to have mandated phased-in reporting by 2011?

 

The AICPA further reported on the status of IFRS knowledge over the last 6-months:

                a.  22% responded they have no knowledge of IFRS (down from 30%).

                b.  43% have a “Basic” knowledge

                c.  24% have “Some” knowledge.

                d.  There was no info reported on the missing 11%.

 

I would also be interest to know what the difference is between “Basic” and “Some” knowledge.  I feel fortunate that I have been through a full IFRS implementation, but what if I were the CFO of a public company that wanted to start planning for an implementation and was looking to hire consultants, where 69% of the population has only “Basic” or “Some” knowledge?

 

                I took my review one step further and conducted a quick review of what the USC Leventhal School of Accounting is doing to prepare accounting students for what could be a massive shift in accounting standards and reporting.

 

                a.  For the MAcc degree, which has an offering of 21 classes to choose from, only one class was international in nature; Accounting in a Global Environment.

                b.  In further review of the entire Accounting course catalog, which consists of 84 classes, there are only two classes that are international in nature; the one listed above, as well as Taxation of Foreign Business Operations.

                c.  There is not one class that is titled as IFRS specific.

                d.  There is not one class that mentions IFRS in the course description.

 

                I would absolutely welcome feedback, but if we are truly moving towards an implementation of IFRS reporting in the U.S. does it really appear that we are preparing ourselves for this shift?  Does it appear from the stats above that we are being set-up for a massive talent squeeze of IFRS experts who can provide the appropriate guidance? I have had my doubts with the SEC calendar and the likelihood for an IFRS adoption for some time, but now that doubt seems to be further supported.

 

This is one area I’d love to hear back from peers on.

 

Thanks for reading….

 

Jeffrey Ishmael

What resources will you need for an IFRS conversion?

July 31st, 2008 Comments off

When we went through our IFRS implementation in 2005, we did so under the mandated schedule within the European union.  Since our corporate headquarters were based in Grenoble, France, our North American operations became a necessary participant in this effort. Never did we believe at the time that IFRS might one day become the global standard with reporting and that GAAP might play second fiddle. In hindsight, I feel fortunate to be a part of that early effort and to have a strong perspective on the resources it took to implement these new reporting standards.

One of the larger challenges we faced was the need to put these new reporting efforts in place, maintain our current focus on the business, but keep our headcount static.  We were not being given the latitude to hire new position(s) to assist with the effort.  It was huge task. I certainly would not endorse this approach again. I had been through other new reporting implementations but this one topped them all.  There was also the need to coordinate our efforts with our staff in Grenoble and develop global reporting and consolidation templates that would be used by each entity. Although we were not publicly traded in the U.S., we still needed to go through the efforts of comparing our GAAP-based results with proforma results calculated under the pending IFRS guidelines. For our entity, there were numerous considerations to the treatment of our R&D expenses and how those would be capitalized, as well as the overall cost-structures for our product. It also necessitated a review of our tax structure along with corporate policies on royalty and dividend payments.

I cannot include the elements of our timeline and all the other aspects we needed to cover in a summary post, but it was extensive.  We had to review areas such as contracts and other agreements to see if a conversion might trigger any covenants. There was also the issue of implementing certain reporting aspects that were required under IFRS but which we were not currently reporting, which needed to be coordinated with our IT team. We needed to ensure that our North American staff was properly trained & understood what was driving the effort.  We worked with the auditors to plan future engagements and how the scope would change under IFRS.  The list goes on.  The schedule for the U.S. conversion has not been defined as of yet, but when you start considering the forward-looking notifications and proformas that public companies will need to compile, it’s a huge undertaking. Today, the earliest estimation that U.S. companies might begin reporting under an IFRS-based format is 2011.  We’re certainly in for a very interesting period of transition….

Thanks for reading . . . .