The debate over whether U.S. companies should be forced to use international accounting standards took on new life last month when the Securities and Exchange Commission assured investors, companies, and accountants that the project is still active. Once the SEC announced it hadn’t lost sight of the project, criticism of International Financial Reporting Standards bubbled up again, with opponents making the same arguments they did when the SEC released the IFRS roadmap in 2007.
The main criticisms: training U.S. accountants and auditors by the proposed 2014 deadline would be impossible; the SEC would cede its regulatory power to a global regulator; the standard-setter that wrote the rules — the International Accounting Standards Board — would buckle under political pressure; and compared with U.S. generally accepted accounting principles, IFRS is weak and would therefore invite accounting abuse.
But IASB chairman David Tweedie says those old complaints don’t conform to current realities. He contends there won’t be many differences, in fact, between U.S. GAAP and IFRS by the year 2015 if the current project to converge the two sets of rules continues at its current pace.
The agenda and time line for the convergence project, which was launched seven years ago by the IASB and its U.S. counterpart, the Financial Accounting Standards Board, will be updated at the end of the month during a three-day joint board meeting. As of today, the time line does not extend past 2011 — the year the SEC expects to vote on whether to move forward with mandatory adoption of IFRS, or to abandon the project.
Speaking to reporters at a Deloitte client conference in New York this week, Tweedie said obstacles regarding U.S. education have already fallen. For one thing, IFRS textbooks are already available in English from publishers in the United Kingdom and Australia. What’s more, by mid-2008 each of the Big Four accounting firms — who are major supporters of IFRS — had begun working with colleges to revamp curricula to include IFRS. (The American Accounting Assn., whose members are accounting professors, created a task force two years ago to develop IFRS curricula that could be rolled out to colleges.)
The notion that auditors are unprepared for the change also is a stretch, argued Tweedie. By his lights, any accounting firm that works with big or small multinationals already deals with financials prepared using IFRS. Further, the American Institute of Certified Public Accountants, which develops audit standards for privately held firms, has launched www.ifrs.com, a Website aimed at providing its 300,000 members with training, resources, and updates on lobbying efforts on behalf of CPAs.
Last year the AICPA also recognized the IASB as a standard-setter, which in effect allows U.S. auditors to express opinions on financial statements prepared using IFRS. The AICPA “put IFRS on the same plane as U.S. GAAP,” says Barry Epstein, a CPA and partner with litigation consultancy Russell Novak & Co. “David Tweedie is right: the momentum [for IFRS] is there; it is like a snowball rolling down a hill.”