Come out from under that rock!
If you're a CPA and you don't live under a rock, you've probably heard about IFRS. But, if you're a student considering a career in accounting, you may not have heard about it. What in the world is it?
IFRS actually stands for "International Financial Reporting Standards" and it's rapidly gaining global acceptance as the standard ruleset for financial reporting by public companies. In fact, more than 12,000 companies have already gotten on board with IFRS. Over 100 nations have adopted the standards, and several more, such as Canada, Japan and Mexico, are expected to either accept IFRS outright, or "converge" their existing standards with IFRS by 2011.
IFRS Pros and Cons
So, you're probably asking if this is a good thing or a bad thing? The verdict is still out on that... There is heated debate on either side of the issue. The theory is that a single "accounting language" will allow for less confusion in the global marketplace. Less confusion means faster and more accurate financial reporting, and greater levels of finanical transparency.
The flip-side of the coin is that many countries are converging into IFRS while maintaining their own standards. This will allow them to cherry-pick the standards they abide by, and could cause further confusion in an already confused environment. What's more, IFRS is far less detailed than U.S. GAAP (for example). Many CPA's call this difference "rules based standards (GAAP) vs. principles based standards (IFRS)." This lack of detail and strict rules could allow for multiple interpretations of IFRS, rendering the whole thing essentially moot.
One thing is certain: IFRS is coming to the U.S. The Securities and Exchange Commission has recently released its roadmap for U.S. acceptance of IFRS. Their proposal suggests that U.S. public companies could be required to accept and implement IFRS by 2014. This would not apply to non-profit and private companies, although they may volunteer to accept IFRS. By as early as 2010, some larger multi-national companies may already begin using the international standards.
The SEC isn't just going to jump into this blindly, though. Their roadmap also includes some "milestones" that need to be accomplished before the U.S. makes the transition.
The body behind the IFRS is the International Accounting Standards Board (IASB) located in London. This group of 14 members from 9 countries is currently funded by a broad range of accounting firms, companies, banks, and private financial institutions. One of the "milestones" on the SEC's roadmap to accepting IFRS is that an regulatory board be set up to monitor the IASB, and ensure it's funding and practices remain independent and ethical. If "milestones" such as this aren't met, then the U.S. won't switch from GAAP to IFRS.
How does this affect me?
No matter if you're a CPA review student, working staff accountant, or practicing CPA, the inevitable U.S. acceptance of IFRS will have an impact on your life. Everyone is going to have to learn these new standards to stay active and relevant in the accounting industry. The AICPA is already considering updating the CPA Exam to reflect IFRS, and students should expect to start seeing related material show up in text books and training software.
Don't freak out though... The AICPA has recently confirmed that it won' t be adding this content to the exam until at least 2010.
Savvy students will start studying IFRS soon... why not get ahead of the game? If you know IFRS when the transition really kicks in, you could be of far greater value to potential employers. If you're already working for a firm, you'll be an IFRS rock star in your deparment.
The point is: Don't procrastinate! Just because it's not on the CPA Exam yet doesn't mean it won't be soon!
Of course, I'll make sure my CPA review books and course materials are up to date and ready for IFRS when the AICPA announces any exam changes, but, in the meantime, feel free to give me suggestions on what you'd like to know more about. Let me know how IFRS is effecting you and your accounting career. Let's work together to make the transition smooth and successful for our entire industry.