Companies Cozying Up to IFRS

Deloitte claims interest is growing, with 30 percent of finance executives considering its adoption, up from 20 percent just six months ago.

After years of resistance to a global accounting overhaul, American companies are rapidly coming around to the idea of adopting international financial reporting standards, a new Deloitte survey of finance executives suggests.

Polling executives at 200 companies, Deloitte found that 30 percent of CFOs and other finance officials would consider adopting IFRS within the next three years if given the option by the Securities and Exchange Commission. Just six months ago, only 20 percent responded positively to Deloitte’s question. The SEC’s decision to accept IFRS filings from foreign companies, and its signaling that the principles-based standards used in much of the world are likely to take hold here, were factors in the change, the accountancy suggested. Now, U.S. firms are busy considering what this will mean for them.

“It’s clear to us that a number of companies have an interest in IFRS, and that interest is growing,” says D.J. Gannon, a partner with the Deloitte & Touche IFRS Solutions Center. “As more companies outside the U.S. report using IFRS there will likely be increasing pressure on U.S. companies to do the same in order to stay competitive in increasingly global capital markets.”

Yet despite this growing openness, major concerns remain. The biggest worry about IFRS continues to be cost. That fear is followed by concerns that investors and analysts will not see it acceptable; that it is not yet being applied consistently around the globe; that the standards are not as comprehensive as U.S. generally accepted accounting principles; and that their own competition does not use it yet.

Another big obstacle is training. The survey finds that more than 60 percent of firms do not feel they have enough employees with sufficient knowledge of IFRS to handle a conversion to the global standard. “As analysts and investors continue to accept IFRS as a reporting basis, the conversion to IFRS will impact the accounting industry both at the professional level and at the universities,” Gannon says.

The Big Four accounting firms — Deloitte, Ernst & Young, PricewaterhouseCoopers, and KPMG — recently have ramped up efforts to capitalize on the convergence of accounting standards with educational programs. Deloitte last month announced the formation of an IFRS “university consortium.” Working with Ohio State University and Virginia Polytechnic Institute, the accountancy has taken on the task of helping develop college curricula to get caught up in the area of international standards and their relation to generally accepted accounting principles.

Meanwhile, E &Y recently introduced IFRS into its own “Academic Resource Center,” and KPMG announced the formation of an “IFRS Institute.” Not to be outdone, PwC said it will introduce a new IFRS-related program into its “PwC University for Faculty” in July.

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