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Business INSIGHTS e-News for Professional Services
International Financial Reporting Standards Are Gaining Ground

What this change can mean for your business' accounting needs.

The International Financial Reporting Standards (IFRS), a set of accounting standards developed by the International Accounting Standards Board (IASB), is gaining momentum across the globe, adopted by more than 120 countries, including Australia, New Zealand, Canada, Brazil, Turkey, Hong Kong, Taiwan, Singapore and countries in the European Union. Although Generally Accepted Accounting Principles (GAAP) in the U.S. remain the gold standard for accounting, a convergence of IFRS and GAAP is likely, even as soon at 2015, according to the American Institute of CPAs (AICPA). In fact, the CPA exam now includes questions about IFRS, ensuring newly minted CPAs have at least a basic understanding of IFRS principles.

Reporting and Disclosure Differences

IFRS differs from GAAP in how businesses approach reporting and disclosure. A few of these differences include how development costs are capitalized and impairment write-downs are reported. In addition, IFRS does not allow Last In, First Out (LIFO). For businesses, moving to IFRS allows them to more easily compare their financial statements to foreign competitors and global businesses to standardize accounting with their U.S. subsidiaries.

Preparing for Transition

Many U.S.-based businesses are taking a wait-and-see approach to IFRS, but the majority of businesses (63 percent) believe that mandatory IFRS reporting will become a reality, according to a PricewaterhouseCoopers survey.

Should your firm begin the transition to IFRS? The Securities and Exchange Commission (SEC) has expressed a strong interest in moving to a single global standard. While the agency has not yet set a timeframe for a transition, professional services firms should prepare for IFRS.

The largest accounting firms already offer IFRS to their global clients, and even small and mid-sized firms are actively exploring IFRS. Check with your own firm to determine their IFRS strategy and any transition recommendations.

The second step is become knowledgeable about IFRS and how it differs from U.S. GAAP. These sites provide educational information about IFRS that will help clarify the pending changes:

  • AICPA.org
  • IFRS.com
  • IASeminars.com
  • IASB.org

When IFRS or some convergence of IFRS and U.S. GAAP occurs, you're firm will be ready to adopt to the standard more quickly and keep your business operating efficiently.

 


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