By Pete Margaritis, CPA
The news from the SEC last week wasn’t earth shattering, it was still a commitment by the Shapiro administration to the converging of U.S. GAAP and IFRS that was originally the SEC plan in November 2008, with a slight modification. In the original SEC roadmap, there was a timeline of 2011 to make the IFRS transitioning determination. This date, although not concrete, has not changed. The milestones set out in the original plan are for the most part not changed. What did change is that the mandatory implementation date for large accelerated filers has been pushed back one year from 2014 to 2015. This should not be a surprise because of a couple of reasons. The change in administration, the economic crisis, and the overwhelming comment letters stating that companies will need more time all support the SEC’s decision.
I have always believed that this process is more about converging standards than adopting IFRS. The original goal set out between the FASB and the IASB in the Norwalk Agreement was toward convergence of IFRS and U.S. GAAP, not the adoption of IFRS. The convergence of standards has been put on a fast track because of calls from the G20 and this can be seen on the IASB project page. Many of the joint projects are set for converged standards by 2011.
The SEC established a work plan team that will issue its first report by October 2010. This will be the group to keep an eye on this coming year because they will be the pulse of when a “date certain” is set.
I do believe that we will ultimately have one set of high quality, country-neutral standards that will be used globally, including the U.S., in the next 3 – 5 years. It will just take a little longer than many wish.
However, that doesn’t mean that we should put off the process of IFRS education until the “date certain” has been set. During this time, we as CPAs need to become bilingual because we will be dealing with IFRS sooner than we think. For example, a German company gains “control” of a U.S. company and the U.S. company has to consolidate its financials into the German parent company. The U.S. company will have to adopt the same accounting policies (IFRS) as its parent. This adoption is usually done in a very short time frame and this situation is happening more and more today.
What if this happens to your client and you don’t have the knowledge to assist them in their transition to IFRS? That client will find a firm who has the knowledge and expertise. Or think about the other side of this situation. You could begin to develop a new line of business in IFRS consulting so you can be the firm that new client seeks.
In conclusion, being bilingual today might just be the right business move for you to make while the SEC goes through their due process.