The curtain has risen, the band is playing — but when, precisely, will international financial reporting standards (IFRS) take center stage?
That’s the question on the minds of companies, academics, audit firms, and virtually every other entity remotely connected with corporate finance. There is growing speculation that the Securities and Exchange Commission will set a date as early as mid-August, which many say is not a moment too soon.
The move from generally accepted accounting principles (GAAP) to IFRS not only seems to be a foregone conclusion but also appears to have been fast-tracked. Last month, Financial Accounting Standards Board member George Batavik said that several key FASB projects, including lease accounting, financial-statement presentation, and revenue-recognition guidelines, have undergone “dramatic scope change” — that is, a reduction — to ensure that they can be completed by 2011.
Many experts now believe that what was once billed as a “convergence” of U.S. GAAP and IFRS has become essentially a switch to the latter, with 2013 whispered as the likely implementation date.
Given the scope of anticipated changes, that date has touched off a keen sense of urgency. Sue Haka, president-elect of the American Accounting Association and a Michigan State University accounting professor, points out that the number of accounting instructors is dwindling even as the number of accounting majors increases. The availability of textbooks and changes to accounting exams are also key issues affected by a date for IFRS adoption, as is the retraining challenge that audit firms will confront.
And, of course, companies of all sizes will face the same challenge in extremis. “I just can’t imagine the amount of money that’s going to be spent retraining everybody,” says Larry Levine, head of business valuation and corporate finance at RSM McGladrey. “Everybody who touches finance and accounting is going to have to have some kind of reeducation and training.”
Is that a clock ticking, or something more ominous?