Dying for a Date

Academia, publishing, and professional organizations are all waiting for a deadline from the SEC before moving to support international accounting standards.

If the United States moves to adopt international accounting standards, who will teach them? What books will they use? And who will write the licensing tests for CPAs?

Although accounting standard setters and regulators are planning the move and companies and auditors are preparing to make the switch, colleges and universities are ill-prepared, said Sue Haka, president-elect of the American Accounting Association and a Michigan State accounting professor, at a conference at Baruch College in New York City today.

The problem: A dwindling faculty. While the number of accounting students has increased between 10 percent and 15 percent over the last 10 years, accounting faculty has declined by 13 percent over the same period, according to a survey conducted by the American Accounting Association and the American Institute of Certified Public Accountants. (By contrast, faculty at business schools over the past decade has increased by 15 percent Haka said.)

What’s more said Haka, the average age of accounting professors is 56, and this older group may decide to retire rather than figure out how to teach two different accounting systems — U.S. generally accepted accounting principles and international financial reporting standards.

In November, the Securities and Exchange Commission floated a proposal to allow American companies to file their financial results using IFRS. The commission’s decision is due out later this year after the SEC considers comments from the public. To many observers, a move to IFRS appears inevitable, though the timing and nature of the transition period remain a mystery.

It is also unclear whether the SEC would allow companies the option to move to IFRS before it is mandated. “The SEC needs to put a stake in the ground” regarding when the transition to IFRS would occur, Haka said at the Baruch College forum, HIgh-Quality Global Accounting Standards: Issues and Implications for U.S. Financial Reporting, which was sponsored by FASB on Monday.

Until the SEC sets a firm date, says Haka, universities won’t change their curricula. And, she added, that means publishers won’t see a demand and won’t change textbooks.

The timeline for putting out a new textbook edition is two to three years. “I had to argue with my publisher not to take out the international section of my book,” said Haka, noting that including new IFRS chapters would be a challenge. (Haka is the co-author of Financial Accounting: The Basics For Business Decisions, published by McGraw-Hill/Irwin.)

While Haka supports a transition to IFRS for the good of global capital markets, she says that teaching accounting standards that are less detailed will be a dramatic change for academia.

Right now, accounting courses that instruct students in U.S. GAAP are weighed down with detailed guidance that is part of the standards’ 20,000 pages. In contrast, IFRS has 2,000 pages. “Looking at the economics of transactions rather than at bright-line rules is a good thing,” says Haka, but it doesn’t easily translate into college courses.

Teaching U.S. GAAP and IFRS simultaneously would require additional courses that would be nearly impossible to introduce to many undergraduate accounting programs. Indeed, she noted, Michigan State’s accounting program does not allow electives.

Added Haka: “I’m not happy that the CPA exam drives curricula, but it is a fact.” Until the exam is changed to include IFRS, curricula won’t be altered, she said.

And therein lies another Catch-22. Educators want state boards to require international standards as part of accounting-education requirements, said Linda Biek, National Association of State Boards of Accountancy, who was on the panel with Haka. “But it is tough to push education if it is not on the exam,” added Biek.

A change to the exam requires practical analysis from the field, and there is not a wealth of practical application of IFRS within the United States, she explained. Biek noted that while state examining boards have identified IFRS as an emerging issue, they are not close to including it as part of the exam.

Once the SEC gives a date for the switch, it will be easier to move to the IFRS goal, says Arlene Thomas of AICPA. She estimates that the CPA exam will include IFRS by 2011. But undergraduates who start college will be unlikely to see a textbook containing much about it until at least their junior year.

Moving to IFRS is not just about “adding an intermediate accounting course” says Michigan States Haka. “It is a business issue and not just an accounting issue. It affects management accounting, auditing, and IT systems,” said Haka.

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