Need For IFRS Experts Escalating
Chief Financial Officers of U.S. firms seem to be reluctant to adopt International Financial Reporting Standards in lieu of U.S. GAAP for the purposes of public reporting. In fact, in a Deloitte & Touche survey of 300 CFOs and other senior financial professionals, only 20% would currently consider switching to IFRS if given the choice. The primary reason for the lack of enthusiasm: a shortage of professionals with sufficient knowledge of IFRS to make the conversion and to maintain IFRS financial statements, both among domestic and international operations. Still, the pressure to adopt IFRS is mounting along with demand for IFRS expertise.
The International Accounting Standards Board (IASB) issued the first-time adoption of IFRS back in June 2003. Since 2005, more than 7,000 listed companies in the European Union have been required to prepare consolidated financial statements under IFRS. Many other countries have announced plans to require IFRS reporting within the next five years. Overall, the increased acceptance of IFRS has led to a surge in the number of companies following suite.
The Securities and Exchange Commission has requested feedback from companies on whether to allow U.S. issuers to report using IFRS as published by the International Accounting Standards Board. The SEC has stated that based on the comments it receives (which are due today, Nov. 13) it could allow U.S. companies to choose between filing under IFRS or GAAP by 2010 or 2011. The Deloitte & Touche study, which polled 300 CFOs and other senior financial professionals, shows that only 20% of respondents would switch to IFRS right now. In contrast, two-thirds of them will consider adopting the international standards within three years.
Switching to IFRS significantly reduces the cost of accounting and financial reporting for multi-national companies, which would otherwise have to translate and reconcile records prepared under various country-specific standards. And according to the Managing Director of Accounting Recruiting at executive search firm, A.E. Feldman, “Any company that has a parent or a subsidiary internationally and requires consolidation will abandon GAAP and report based on IFRS.”
Almost 100 countries currently require or allow the use of IFRS by public companies, according to the SEC. Deloitte & Touch’s Gannon says about 40% of the Fortune Global 500 currently use IFRS. He also predicts that number would grow as Canada and Brazil adopt IFRS over the next few years. “The movement toward IFRS is being driven largely by the markets. As more companies outside the U.S. report using IFRS, there will likely be increasing pressure on U.S. companies to do the same,” says DJ Gannon, Partner at Deloitte & Touche.
The survey however, finds that companies lack of understanding and experience using IFRS are major deterrents to its adoption. More than half the companies considering switching to IFRS say they lack the skilled resources to make the conversion and maintain IFRS financial statements.
In an increasingly global financial community, candidates seeking accounting jobs stand to benefit from an international perspective. Executive recruiting firm, A.E. Feldman, says the number of accounting jobs for IFRS-trained accounting talent is increasing. The recruiting firm adds however, that competence with international financial reporting models is key and U.S. accountants who apply IFRS require solid analytical skills and sound judgment.
