Forum Participants:  Set the Date for IFRS Adoption

Without an adoption date, public companies and accounting firms are in a holding pattern in their preparations for International Financial Reporting Standards (IFRS).  That was the unanimous verdict of participants in the Forum on High-Quality Global Accounting Standards:  Issues and Implications for U.S. Financial Reporting.
 
The forum, sponsored by the Financial Accounting Standards Board (FASB), took place on June 16 and focused on whether and how to move the U.S. financial reporting system to IFRS and broadly define next steps in that process.
 
Barry C. Melancon, president and CEO of the American Institute of Certified Public Accountants (AICPA), called for a three to five year time frame for the U.S. accounting profession to adopt IFRS.  That timeline was supported by the results of a recent AICPA survey where 34 percent of respondents said they’d need three years to prepare for IFRS and 31.4 percent said they would need four or five years.  Another 9 percent indicated they would adopt IFRS early if permitted to do so.
 
“The overwhelming feedback we get from people who focus on this issue is, ‘let’s get it done.’ Let's get a date certain for public companies.  Let’s put that date out there so the momentum can build, all of the proper steps can be put in place, and work groups that need to be in a whole variety of different areas can follow,” he said.  “…You converge, converge, converge and at some point you have to adopt.  You can’t continue to get closer.  In the accounting standards area, we are in that finish line area of getting to the adoption point.”
 
According to Sam Ranzilla, KPMG partner-in-charge of professional practice and a member of the Center for Audit Quality’s Professional Practice Executive Committee, the lack of a firm transition date presents a significant obstacle in terms of training.
 
“Timing is the most significant issue because it’s got to be used in a relatively short period, it’s got to be just in time,” he said.  “…The current uncertainty we live in is causing us to have some inertia around our training.  My personal view is any long optional period will also significantly affect the quality of the training and our ability to make a seamless transition to IFRS.”
 
In addition to training, CPA firms need to prepare for the reality that during the transition process, they will need to be equipped to manage two accounting systems; IFRS and U.S. GAAP.
 
That will happen “even if the SEC were to mandate in a fairly quick way that public companies go to IFRS,” Ranzilla said.  “There is going to be a dual model in this country for some period of time and we’re going to have to deal with that.”
 
Like their larger counterparts, small public accounting firms are also hampered by the lack of a firm transition date.  Not only do they lack the resources to manage dual accounting systems, but they currently do not have the client demand necessary to allocate resources for training and other preparatory steps.
 
“The challenge we have right now is we have no demand.  Therefore we’ve not developed the understanding, the talents and the tools… Until we have some sort of a date, I don’t think a lot is going to happen in smaller firms and smaller companies around the country,” said Steven Rafferty, BKD partner-in-charge and a member of the CAQ’s Professional Practice Executive Committee.  “Let’s develop a realistic time table and let’s all go on some orderly transition.  Maybe not all at the same time, but let’s pick a timeframe and get this behind us so we’re not running two systems.”

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