Category: IFRS

Anyone Who Gives a Rat’s Behind About IFRS Needs to Mark July 7 on Their Calendars

‘Cause there’s gonna be a roundtable.

The Securities and Exchange Commission staff announced today that it will sponsor a roundtable in July to discuss benefits or challenges in potentially incorporating International Financial Reporting Standards (IFRS) into the financial reporting system for U.S. issuers.

The July 7 event will feature three panels representing investors, smaller public companies, and regulators. The panel discussions will focus on topics such as investor understanding of IFRS and the impact on smaller public companies and on the regulatory environment of incorporating IFRS.

“We must carefully consider and deliberate whether incorporating IFRS into our financial reporting system is in the best interest of U.S. investors and markets,” said SEC Chief Accountant James Kroeker. “This roundtable will provide an excellent opportunity for investors, preparers, and regulators to provide the SEC staff with valuable information that will help the Commission in its ongoing consideration of incorporating IFRS.”

See you there. If you manage to recover from your July 4th meat sweats, that is.

EU Official Gives IASB a Paternal Driving Lecture on Accounting Standards

Did this Jeroen Hooijer character forget that he’s addressing a knight?

[Hooijer] said world leaders have extended the deadline for convergence from June to the end of this year and likened the IASB to a sports car driving at 160 kilometres an hour to the south of France. “We would like to slow down to 120. We don’t want to stop it. If you drive to the south of France and you only arrive half an hour later, the risk of an accident is 70 percent lower,” Hooijer said.

EU body tells accounting rule setter to slow down [Reuters]

Sir David Tweedie’s Patience Is Wearing Thin

He may be on his way out the door but still IASB chair David “that’s Sir David to you” Tweedie is still sick of all our heel-dragging on IFRS in the U.S. He hasn’t gone so far as to say we’ll be left in the capital market dust if we don’t adopt tomorrow but he’s clearly fed up with our procrastination.


Via CFO.com:

If they put off a commitment to international financial reporting standards beyond 2011, U.S. accounting rulemakers and standard-setters would impose “unnecessary costs and risks on U.S. companies,” Sir David Tweedie, chairman of the International Accounting Standards Board, said Wednesday at a U.S. Chamber of Commerce gathering on the future of financial reporting.

The major risks are competitive ones, said Tweedie. U.S.-based multinationals already must fill numerous sets of accounting books. Many must file their financials under U.S. generally accepted accounting principles even as they report on the activities of their overseas subsidiaries under IFRS or the standards crafted by individual nations, he pointed out. At the same time, their foreign competitors can use IFRS for all purposes, even for filing with the Securities and Exchange Commission, he added.

As is, the transition to IFRS is estimated to cost American companies $35 million per year (remember 3 years of restatements will be required). We’re not sure if he has access to different estimates that somehow make qualified IFRS monkey restatements more expensive in 2012 and beyond than they would be by the end of this year but it seems painfully clear that he means business.

I’m not sure if he missed the memo but we don’t seem as enthusiastic about convergence as we did when we delayed the release of a roadmap in 2008. Three years later, we don’t appear to be any more prepared for the transition than we were then and still have three (or make that four) more good years to drag our heels according to recent statements by the SEC.

How much clearer does Tweeds need it? We’re just not that into your standards.

Michael Bloomberg Is a U.S. GAAP Man

Merging the iconic New York Stock Exchange with Germany’s Deutsche Boerse AG will force European companies to switch to using U.S. accounting rules which have superior disclosures, Mayor Michael Bloomberg said on Friday.” This will force a common set of accounting standards on the world; the American disclosures are better,” Bloomberg said on his weekly WOR radio show, though he admitted U.S. rules did not prevent Bernard Madoff from swindling billions of dollars through a Ponzi scheme. [Reuters]

What’s on Incoming IASB Chairman Hans Hoogervorst’s Plate?

Your next IASB chairman, Hans Hoogervorst, already has a few things on his to do list (right after scratching Sir David Tweedie’s name off the door), one of which involves restoring investor confidence by redoing last year’s bank stress tests in Europe since it seems they were not really credible, “One reason for scepticism was that sovereign bonds on the banking book were deemed to retain their full value, despite the fact that many were trading at steep discounts in the market,” he said. “The fact that some Irish banks that had passed the test later turned out to be insolvent only served to reinforce the doubts in the market.”

Doubts? That’s a kind way to put it.


Speaking at the two-day European Commission financial reporting and auditing conference, Hoogervorst also wanted to make sure everyone is clear on who rules the IASB. Despite appearances that rules are made by a handful of influential Europeans who like to play with accounting regs, he insisted the IASB is a multi-national group in which everyone gets a say. Or rather, he insisted that he’ll be trying to make sure the IASB is perceived as such, “It’s very important that we develop a governance structure that is more inclusive. At all costs we should avoid the perception that IFRS is dominated by a small group of nations,” he said. He did not seem to clarify if he was more worried about the actual structure of the IASB or just the appearance, nor did he mention how many U.S. delegates will have at the IASB’S table if we were to stop dragging our feet and just adopt already.

While auditors are taking a lot of heat for failing to catch just how bad off European banks were, H-squared doesn’t seem to feel they deserve so much criticism as they were simply following the rules. “How critical will auditors be when they see that regulators consider that severely discounted securities carry no risk?” he asked, obviously rhetorically.

Also in attendance at the conference, Federal Reserve senior associate director and chief accountant Arthur Lindo, who is hopeful that we here on this side of the pond will “move diligently towards some form of IFRS in the near future.” What Lindo did not say was whether or not the Fed would also adopt these rules or continue to use their freakish hybrid of GAAP and government accounting that they make up each and every year. Perhaps convergence will mean throwing in some IFRS into their 300+ page financial accounting manual.

Looks like Hans is going to have his hands full for the foreseeable future. Veel geluk met dat!

Accounting chief calls for more credible bank test [Reuters]

IFRS: Four. More. Years.

Comments reflected “a lot of unanimity around, if we go in this direction, allowing sufficient time for companies to adjust,” said Schapiro in a question-and-answer session following her keynote address to the American Institute of Certified Public Accountants’ national conference on accounting and auditing issues for public companies. “It’s likely to be a minimum of four years,” but that’s still a point for the SEC to decide, she said, assuming it decides to incorporate IFRS into U.S. capital markets. [Compliance Week]

SEC Intends to Take All the Time It Needs to Make Up Its Mind on IFRS

So any retiring knights out there feeling anxious can just cool it. And rubbing elbows with Deloitte talking about how great things will be isn’t going to make the Commission work faster.

That being said, Jim Kroeker will have you know that things are going along swimmingly, per the Commission’s press release:

“The staff has invested significant time and effort in executing the Work Plan, and we’ve made great progress to date,” said SEC Chief Accountant Jim Kroeker. “This progress report emphasizes the importance of transparency in the staff’s activities, and can help the public’s understanding of the magnitude of this project and the staff’s progress.”

So make no mistake; the SEC is on this. However, they do have some concerns, “[W]hether the international accounting rule maker is truly independent and whether IFRS is high quality.”

So if you could address those two things, that would be appreciated. Sir David.

Rest Easy: The IRS Is Preparing for IFRS

For the first times since we started paying attention, the TIGTA is simply putting everyone on notice that the IRS is on top of this IFRS thing. No “You suck at this IRS” or “Here’s a list of things you should considering doing if you are interested in not sucking any more, IRS.” Simply, “Here’s what they’re doing. Have a nice day.”

The IRS began developing plans for strategic and operational activities related to the adoption of the IFRS in 2009.

TIGTA found that the IRS: is training employees about IFRS concepts and potential issues; working with the tax preparer community to identify and outline IFRS implementation concerns; and developing procedures to address issues related to IFRS conversion efforts.

“The IRS is appropriately laying the groundwork for its increased oversight of international taxation by gaining an understanding of the International Financial Reporting Standards,” said J. Russell George, the Treasury Inspector General for Tax Administration.

TIGTA did not make any recommendations in this audit and the IRS did not provide any comments on a draft of the report.

Doesn’t quite feel right, does it?

The IRS Is Taking Action to Address the Impact That International Financial Reporting Standards Will Have on Tax Administration [TIGTA]

Some French Guy Still Trying To Tell the U.S. What to Do Re: IFRS

Look, pal. We get that you’re anxious to slap these sets of accounting rules together like an IKEA ottoman. We also get that you and a certain knight want – nay – need the RW&B to be on board.

But we don’t know who you’re trying to boss here. See, we’re fairly certain you’d be speaking German if it wasn’t for us. Furthermore, in case you haven’t noticed, we like dragging things out until the last possible minute. Or just ignoring things until we have a giant mess on our hands and then we try cleaning up. Why would we treat IFRS any different?


We understand it’s a new century, millennium and you guys have a rough go in the World Cup but you can give it a rest.

We’ll get to IFRS when we’re good and ready and just because today is Bob Herz’s last day at the FASB doesn’t mean you need to get all anxious about it:

The US is due to make a decision about whether fully buy in to international standards in the latter half of next year. There has been speculation that the appointment of a new chairman for the US standard setter, FASB, could determine which way the world’s biggest economy will go on international standards.

In a speech yesterday to a conference organised by European financial think tank EUROFI, Barnier welcomed the involvement of the US in the Basel talks on financial regulation. But he added that the US should not part company with IFRS.

“It’s essential that we adopt the same prudential framework. I say this very simply, we cannot afford to take the risk of divergence in this area. And this is also the case for accounting standards,” he said.

EU chief urges US to buy into IFRS [Accountancy Age]

NYU Chair: The World Won’t End if the United States Converts to IFRS

[caption id="attachment_12975" align="alignright" width="122" caption="Source: Stern School of Business"][/caption]

Now that convergence has been delayed, the anti-convergence/IFRS contingent is hopeful that this is a major sign of defeat. Whether that’s the case or not remains to be seen but don’t expect the debate to go away.

We recently spoke with Dr. Frederick Choi, Dean Emeritus and Distingu��������������������sor of Business and Chair of the Accounting Department at New York University’s Leonard N. Stern School of Business about the latest current events and what Stern does to prepare its students for IFRS in their careers and on the CPA Exam.


GC: So the number one question on everyone’s mind – will the world end if the United States converts to IFRS?
Dr. Frederick Choi: [laughs] My answer to that is to not to worry, the world will continue as it always has, so we’ll continue to have fun with accounting like we always have in the past.

GC: So there’s no risk that the U.S. will lose its imperial superpower status as a result of this?
FC: No, I don’t think so. I think there’s sufficient flexibility in international accounting standards so that we can continue on as before.

GC: So why do you think the SEC is so cautious? Are all those lawyers scared because there might be numbers involved?
FC: First of all, the U.S. environment is a very litigious environment so I think there’s a concern that IFRS will permit more judgment for the company presenting the numbers. U.S. GAAP, because of the litigious environment, has to be a little more prescriptive, that is, “here are the rules, here are the exceptions.”

At one time in the US, our accounting rules were principles-based and required a lot of judgment. In the ‘60s some companies were were cooking the books which resulted in reporting scandals and class-actions. Then someone said, , “hey, the audit firms have a lot money, so let’s go after the auditors.” That’s when accounting prescriptions became much more rules-focused. So I think the big fear is that moving from an environment that is more rules-based to one that is more principles based will require much more judgment and perhaps invite more litigation.

GC: So a little current events question – what do you make of the FASB and IASB’s announcement that the convergence project is going to be a tad late? Was the June 2011 to get those G20 guys off their backs or did they really think they were going to get this pulled off?
FC: I think when they first started the project towards convergence they did so in good faith but there are some significant differences that need to be ironed out. And given the vested interests, it’s going to take a while. I’m not surprised that the deadline has been extended.

GC: And the SEC seems completely all right with it.
FC: Yes.

GC: Say I’m against IFRS – in fact, I’m a militant for U.S. GAAP. I don’t want IFRS anywhere near our capital markets because it’s too principles-based, countries need financial reporting autonomy and that it doesn’t really benefit anyone except a bunch of big accounting firms that need a new revenue stream? Plus, it’s going to be a nightmare for companies to convert to and it doesn’t really help small and medium-sized businesses…
FC: That’s correct.

GC: …having said all that, your response to me is…
FC: I look at this from the point of view of the the analyst. From the point of view of the analyst, the name of the game is to read the tea leaves and get as close to the underlying transaction as possible. The one strength of U.S. GAAP is that there’s a lot of research that goes into the pronouncements. I think U.S. GAAP – without sounding nationalistic – is the best researched, empirically as well as conceptually, accounting standards in the world.

I think an analyst should not be bogged down by whether U.S. GAAP is better or IFRS is better. Analysts have always taken the numbers and massaged them to get closer to what he or she thinks the underlying economics are. In fact, if you look at the not-so-sharp analyst who will say, “Oh, we’re going to IFRS and that’s going to make my life easier,” my response is “No, it’s not.” I think it will be more complicated.

GC: Okay but there are going to be some tricky areas, right? What are those going to be?
FC: I think the biggie is the ability to write down an asset and write it back up. Here in the States, when we impair an asset we cannot go back and reverse it. The rationale behind that was you don’t want to give firms the option to manage the bottom line.

Firms that write asset back up will be able to smooth earnings. Say you and I are in business and we have a good year, so we write down an asset and take the loss. Next year, we say “Oh my god, results are horrible. How can we pump up the bottom line?” We reverse the write-down. So, that’s a big concern that I have. That applies to intangible assets, it applies to plant & equipment, it applies to inventory. So this is a biggie.

Another difference worth nothing is if management feels that the standard they are following is misleading, they can actually deviate from the standard. That’s a major concern as well.

GC: How familiar are you with integrated reporting? How do you think it fits in with the transition and is this something we’ll see more of or are we still at the baby steps stage?
FC: I think from an investor’s point of view, that’s going to be confusing because you’re going to have hard numbers combined with very soft numbers and I’m not so sure that’s going to make life easy. I think if you keep the soft stuff in a separate statement then the analyst can look at the hard numbers and come to a preliminary conclusion and looking at the soft numbers make some professional judgment – do you bump the number up a little bit or do you interpret it a little more cautiously. To me that’s the better state of the world.

GC: And as it stands right now, there’s no way to audit the non-financial information
FC: That’s correct.

GC: What are you doing to prepare your students at NYU for the transition?
FC: I put together a team here at Stern and we looked at all the courses that deal with financial reporting and basically I think the whole approach that we’ve taken is that our responsibility is not to teach students to memorize rules, our responsibility is to teach them how to think and think critically. We say here is an international accounting standard. Let’s talk about various measurement issues that we normally talk about and when a new standard is issued, I’ll expose you to both the U.S. standard and the international standard. For now, those two sets of standards will continue for the next several years. If the international standard is different from the U.S. standard we’ll say “here’s the implications on the financial statements and profitability, liquidity, ratios, etc.” So students can identify the impact of the different measurement framework on the financial statements.

GC: How have you balanced, from a curriculum standpoint, IFRS education and the requirements for the upcoming changes to the CPA Exam?
FC: Our approach is not to teach students to pass the CPA Exam, our approach is provide an education. Students need to learn and think critically because rules will change over time and I think it’s best to develop those critical thinking skills. We infuse international reporting standards throughout the curriculum but not in the sense where we say, “Here, memorize this rule and be able to spit it out and ace that question on the CPA exam.” We’re basically saying, “here are the standards, here are the differences, here’s how they will impact the financial statements and be aware of that.” We have a combined BS/MS in accounting program that prepares students for the 150 hours and a required international accounting and reporting course is part of that degree.

GC: So in other words, they’ve got this on lockdown and they will all be go-to experts on IFRS at their firms?
FC: I think they’ll be able to speak intelligently about IFRS but they won’t be rulebooks.

GC: What are you hearing from the firms that recruit at NYU (other than “send us the smartest ones) on this issue?
FC: I think the market likes our product because we develop those critical thinking skills and our placement rate at the Undergraduate College is close to 100%, so they like the product irrespective if they know IFRS or not because if you’re smart and have the critical thinking skills you can pick up IFRS in very short order. Given a choice between two students – one that has been exposed to IFRS and one that has not, but they’re both bright, and the firm can only take one, of course the firm will take the one with the familiarity with IFRS but I don’t think that’s ever been an issue.

GC: Back to the CPA exam. Of course everyone at NYU will be passing no problem but what about students and instructors elsewhere? Should they cram it in and get it passed in 2010 or will they be ready for the 2011 exam?
FC: I think many schools are already gearing up. We have shared our approach with many schools via workshops, conference presentations and the like. We are always ready to assist. Our approach is, “ We’ve exposed you to IFRS and if it is on the exam, youlcan get more details in a review course or you can bone up on IFRS on your own, but it shouldn’t be a big issue.

Sir David Tweedie Is Leading U-S-A Chants

Some of you might think that Sir David Tweedie is trying evangelize IFRS all over this great U.S. GAAP land because A) he’s a wily Scotsman who isn’t afraid to wear a kilt to the office and sure as hell isn’t going to let a bunch of know-nothings tell him what’s best and B) he’s trying to throw his title.

Or maybe you just think he doesn’t care if the US of A is down with the financial reporting Kumbaya. Well Tweeds is Stateside putting everyone on notice that if that’s what you believe, you would be wrong. DEAD WRONG.

“The world is moving to a single set of high-quality global accounting standards, and this is too important an area for the U.S. not to be involved…After almost a decade of work to improve IFRS and U.S. GAAP and to seek their convergence, it’s time to finish the job.”

That’s the best he can do. And don’t bother asking him for the title, he can’t give it to you.

International Accounting Standards Board Chairman Sir David Tweedie Addresses AICPA Governing Council [AICPA]