Tag: IFRS

Apparently Accounting Rule Convergence Is Not 100% Total Convergence

Thumbnail image for Thumbnail image for merge.jpgYesterday the FASB and IASB got together and spent 23 pages convincing everyone that convergence of accounting rules will happen by June 2011. If you haven’t been convinced by the steps one paragraph statement that was issued saying how ‘encouraged’ she is about the latest re-re-affirming.
There is no doubt in anyone’s mind that there will be a single set of accounting rules — for the entire financial reporting universe — rolled out and everything will be right with the world in June 2011.


But will it be a single set of standards? Edith Orenstein of FEI Financial Reporting Blog:

It is interesting to note that the FASB-IASB joint statement speaks in some places of converging to a ‘single’ set of standards, and in other places of converging to a ‘common’ set of standards. To some, these terms can mean a world of difference. However, the terms are often used interchangably by many different parties. For example, here are some excerpts from the joint statement:

We are redoubling our efforts to achieve a single set of high quality standards within the context of our respective independent standard-setting processes.
Our goal is to develop together common standards that improve financial reporting in the US and internationally and that foster global comparability. Achieving such improvements is consistent with the objectives of the IASB that are set out in the Constitution of the IASC Foundation. It also fulfils the responsibility the FASB has under US law and the Securities and Exchange Commission’s 2003 Policy Statement to consider, in developing standards, whether international convergence is necessary and appropriate in the public interest and investor protection.

(emphasis original)
That clears it up, doesn’t it? So it’s either a “single set” or “common standards”? FEI Blog thinks it’s a progression, “Presumably, once a set of ‘common standards’ is acheived, the next step would be to officially adopt one set (again, presumably, IFRS, which is used in over 100 countries) as the ‘single’ global standard.”
While this may be the case it still doesn’t mean that everything will be the same.
CFO:

“Convergence doesn’t necessarily mean the same,” says D.J. Gannon, a Deloitte audit partner and the firm’s expert on international financial-reporting standards. In fact, Gannon says, there is no expectation that any of “the lingering differences” between rules that are already converged will be handled through standard-setting. “So the bottom line is that companies [reporting results under U.S. generally accepted accounting principles] are going to have to deal with those differences if they apply international financial-reporting standards at some point in the future.”

Good lord. So for all practical purposes, it sounds like there will still be differences. Frankly, we’re disappointed in this revelation. If someone had told us from the get-go that it wasn’t going to be 100% the same accounting rules we wouldn’t have made such a big stink about the absolute impossibility of the endeavor. Going forward we’ll be taking this even less serious.
FASB, IASB Reaffirm Convergence By June, 2011 [FEI Financial Reporting Blog]
“Convergence Doesn’t Necessarily Mean the Same.” [CFO]

Would You Like Another Certificate on Your Wall?

Thumbnail image for MelanconBCROP2.jpgWe knew it. Lucky for you, there will be a brand spanking new certificate come May of 2010:

Because members will need to be able to demonstrate a competency in IFRS, the AICPA plans to launch in May 2010 an IFRS Certificate of Accomplishment for CPAs, which will require 72 hours of content to complete.

AICPA President and CEO Barry Melancon* is acutely aware of your disdain for paint and wallpaper so this latest certificate should fit in nicely with the myriad of other certificates on the wall of your office.
You’re certainly not ashamed of your handsomely framed “[Name] Has Successfully Completed Auditing Cash – 2004” certificate so an IFRS Certificate of Accomplishment will look damn good up there.
Melancon: Issues Facing CPAs Include Globalization, Economic Recovery [Journal of Accountancy]
*Two things: 1) How long has this guy been the HFMIC at the AICPA? Is it a lifetime appointment like the SCOTUS? and 2) How do you think he gets his hair to do that?

Grant Thornton Survey: 40% of CFOs Never Ever Ever Want IFRS to Replace GAAP

dragging.jpgAll this IFRS hubbub is going to be expensive and time consuming anyway so let’s just forget it, shall we?
Eh, not so fast, IFRS haters. The remaining 60% of the respondents did state that they thought that IFRS should be required at some point in time, including 7% that want it ASAP, thanks.
Part of the resistance may be that lots of CFO/controller types have got no idea how IFRS is going to affect their company’s reporting. GT’s survey shows that 90% of the respondents don’t use IFRS currently and earlier this summer another survey cited that many CFOs weren’t even sure how IFRS would affect their reporting.
The IASB is clearly serious about the whole thing, and the FASB, while less excited, seems to be on board, along with big shots like Jim Turley. Finance execs can stall all they want but eventually IFRS will be all up in their business. Probably should get crackin’.
40% of U.S. senior financial executives don’t want IFRS to replace GAAP [GT Press Release]

CPA Exam Changes Shouldn’t Affect You

The CPA Exam is apparently changing, whether you like it or not.
More, after the jump


Web CPA:

The American Institute of CPAs has scheduled Jan. 1, 2011 as the official launch date of CBT-e, a more technologically modern version of the Uniform CPA Examination…CBT-e, short for Computer-Based Testing evolution, will also update the content of the Uniform CPA Exam. The exam will include new content and skill specification outlines, including questions about International Financial Reporting Standards…Also starting on Jan. 1, 2011, new authoritative literature will be released based on the FASB Codification of accounting standards and a new research task format will be introduced on the CPA Examination.

Considering this is over a year off, these changes should not be of concern for most of you but considering some of the scores we’ve seen for this year and pretty much everyone seems to be ignoring the new Codification, maybe some of you should be worried.

Accounting Professors Aren’t Waiting for Bureaucrats to Get Their Act Together

graduation.jpgEven though the convergence of IFRS and U.S. GAAP seems like a DeLorean ride away accounting professors polled believe that it should be included in the curriculum, according to Web CPA:
More, after the jump

The survey, by KPMG and the American Accounting Association, found that half of the professors who responded to the survey said they thought a low sense of urgency exists among U.S. regulators to adopt IFRS by a “date certain,” while only 16 percent believe regulators have a high sense of urgency.

Regardless of academics’ pessimism about the SEC getting their shit together and making this marriage of accounting rules happen, the slow integration into the American curriculum is still occurring:

Despite this challenge, 70 percent said they have taken significant steps to incorporate IFRS into the curriculum. In addition, 83 percent believe IFRS needs to be incorporated into their curricula by 2011…Given the dynamics of the current regulatory environment, 79 percent of faculty believe that U.S. GAAP should continue to be taught over the next three to five years, while progressively incorporating more IFRS concepts via a compare-and-contrast approach as the conversion date approaches.

A majority of the respondents to the survey also expect IFRS to be included in the CPA Exam by 2012/2013 and in intermediate accounting textbooks by 2011/2012.
For those of you still cracking the books, discuss if your profs have brought this up and what kind of priority they’re putting on IFRS. We’re not holding our breath for anything meaningful from TPTB.
Accounting Professors Urge IFRS Education [Web CPA]

IASB Chairman Would Like the SEC to Get With It

TOLD YOU.jpgSir David Tweedie, IASB Chairman, would sure appreciate it if the SEC would make up its damn mind about whether or not to commit to converging U.S. GAAP with IFRS. He spoke at the American Association of Accountants (AAA) annual meeting in New York yesterday and figured he might as well call out the SEC, who seems to be stonewalling him. He’s giving them until 2011 to figure it out.
Tweedie has been making like some kind of financial reporting missionary, going all around the world preaching the good word of IFRS. He’s said he’ll have 150 believers by 2011. But everywhere he goes, all anyone can talk about is whether the U.S. is converted yet.
More, after the jump

“That is a question I am asked all around the world. The convergence program is designed to reduce the cost of transition. FASB is riding two horses: US GAAP and trying to converge at the same time, but so are we.”…If you’re going to have global standards, we need the US, but it can’t go on indefinitely,” he said

We’re impressed that the knighted bean counter is putting his foot down here. We figured the SEC and the FASB could just continue doing whatever it is they do and Tweedie would just keeping asking them about it every month or so like they owed him fifty bucks.
Tweedie Warns of 2011 Deadline for IFRS Choice [Web CPA via Accountancy Age]

Why IFRS is Similar to an Obscure Reality TV Program

jon-and-kate.jpgLate on Friday we told you about the rager that the IFAC was throwing over the weekend in London and today we get the less than surprising news that they want the governments of the world to push for global accounting standards.
“According to IFAC, participants at the conference agreed that the public interest would best be served by a single set of high-quality, principles-based financial reporting and auditing standards for listed and public interest entities.”
The problem with this whole push for IFRS is that getting anyone to care about accounting rules is like trying to get men interested in the whole Jon & Kate Plus 8 drama. They’re completely clueless at first mention and when you attempt to get into the details interest is immediately lost.
Leading accountants tell governments quicken pace of global standards adoption [Accountancy Age]

The Convergence Debate, Already Geeky, About to Get Geekier

Academics in the U.S. aren’t too psyched about the benefits of IFRS, according to Compliance Week:

The United States already meets a high level of reporting quality relative to other countries as a result of various “institutional features,” said [Peter] Wysocki [Professor at MIT]. Those include things like an active investor and analyst community, a rigorous audit process, and oversight by the Securities and Exchange Commission, among others, he said.
“It’s a little difficult to argue a move to IFRS will result in significant improvement in reporting quality,” Wysocki said. “We’re already at a high level because we already have those institutional features in place.

The debate over convergence has reached Biggie/Tupac fever and now that U.S. GAAP has got American bookworms shouting about how IFRS isn’t all that, we expect that academics on the other side of the pond will get involved and the debate will get fiercely geekier.
Academics: Move to IFRS Won’t Boost Reporting Quality [Compliance Week]

Score One for U.S. GAAP

two thumbs up.jpegU.S. GAAP just got a little boost in its image versus its sexy rival, IFRS, courtesy of Audit Integrity, a research services firm.
Audit Integrity studied filings by European companies from 2001 to 2008, looking at filings both pre and post IFRS adoption. The objectives were, “to determine whether IFRS has been implemented consistently across Europe, whether it has resulted in a common method of reporting financial data, and how the depth and comparability of data under IFRS compares to U.S. GAAP.”
At first glance, one might think that with all the bashing of U.S. GAAP in recent years that this was IFRS chance to prove once and for all that it was the new cock of the walk.
Well, not so fast GAAP haters:

“Based on our analysis, we are not seeing a significant improvement in financial reporting when companies shift to IFRS,” said Jack Zwingli, CEO of Audit Integrity. “We found that IFRS is a common standard, but there are significant variances in IFRS reporting, in the completeness of information, the timeliness and the filing frequency.”

Sounds like IFRS ain’t all that does it? You want more?

The firm says overall there are indications that financial reporting is more consistent and more comparable under IFRS than before IFRS adoption in Europe, but it’s not clear that IFRS represents an improvement over U.S. GAAP. In fact, the firm’s report says GAAP filers may have an edge over IFRS filing in terms of the timeliness, depth and breadth of financial data provided to investors.

Ouch, IASB. You want the best part? The Europeans disclose less on executive compensation than we do here in America. You’re all familiar with how popular corporate executives are. To wit:

[Jack] Zwingli [Audit Integrity CEO] said he was also surprised that the analysis revealed IFRS generally provides less information about executive compensation. “It’s not good in the United States, but it’s better than it is in Europe,” he said. “There is more consistency in reporting and deeper coverage of data under GAAP than under IFRS.”

Seems like IFRS has got work to do…IASB, you can call us when you want to get serious.

Study Pokes Holes in IFRS Reporting Quality, Consistency [Accounting & Auditing Update/Compliance Week]