Firms Hiring Accountants with IFRS Expertise
Firms in the U.S. are bracing for the convergence of global accounting standards. U.S. and foreign accounting regulators are about to unveil a new plan to expedite the convergence of international and U.S. accounting rules, according to Reuters. Their goal is to have all major capital markets operating from one set of standards by 2013. The report quotes Robert Herz, Chairman of the Financial Accounting Standards Board (FASB) as saying, “It is a new world and we’re going to have to figure out how to play in that.” The pressure to adopt International Financial Reporting Standards (IFRS) is mounting…along with demand for IFRS expertise.
“The question about whether the world is going to global standards is no longer ‘if,’ but ‘when,’” said KPMG Chairman and CEO Timothy P. Flynn in a statement. 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. Here in the U.S., however, the lingering lack of enthusiasm for convergence stems from 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. As a result, executive search firm, A.E. Feldman reports that accounting jobs are opening up as the need for IFRS-trained accounting talent intensifies.
The international convergence of accounting standards is a global trend that is gaining momentum. 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.
Today, roughly 100 countries (including the European Union, Hong Kong, Australia, Russia, South Africa, Singapore and Pakistan) require or have a policy of convergence with International Financial Reporting Standards (IFRS). Many more have announced plans to require IFRS reporting within the next five years. And as companies continue to vie for overseas capital and investors seek to access foreign markets, the demand for financial reporting standards that transcend national borders is growing.
U.S. GAAP vs. IFRS
Pressure is mounting on the United States to set a national plan to move to IFRS from U.S. Generally Accepted Accounting Principles (GAAP).
The SEC has already begun moving towards convergence. Back in November, it eliminated a requirement that foreign companies with U.S. stock market listings to reconcile their financial results with U.S. GAAP. The unanimous vote immediately affected roughly 1,100 companies with U.S. listings. According to Reuters, the SEC is expected to unveil a plan to adopt IFRS this summer.
The FASB and the London-based International Accounting Standards Board (IASB) are also expected to release an updated “Memorandum of Understanding” that will lay out how the boards plan to work together and prepare the industry for one set of accounting standards, according to Reuters.
The boards hope to resolve what they called “significant fundamental weaknesses” in IFRS, and what they believe are major impediments to adopting IFRS in the United States by 2011. Specifically, several key differences between IFRS and U.S. GAAP will have to be ironed out, including key topics such as inventory accounting, insurance industry accounting, when companies can recognize revenue and the use of mark-to-market or “fair value” accounting.
The boards will then issue a moratorium on major accounting changes leading up to the “target date” of mandatory U.S. IFRS adoption in 2013, reports Reuters, citing a document on the IASB Web site.
Demand for IFRS Expertise
The move to International Financial Reporting Standards (IFRS) is the single most important initiative in the financial reporting world, according to Ernst & Young. The firm says convergence stretches far beyond accounting to affect every key business decision, not just how it is reported. E&Y also contends that as IFRS becomes the financial reporting language in a growing number of countries, consistent interpretation and application becomes increasingly vital. As a result, professionals with expertise in IFRS are hot commodities.
The American Institute of CPAs has proposed that CPA candidates be tested on the IFRS conceptual framework and that additional testing of international standards occur if IFRS becomes generally accepted in the U.S., according to WebCPA. The report states that the AICPA Board of Examiners acknowledges the worldwide movement toward acceptance of IFRS, and recognizes that IFRS is in the process of converging with U.S. GAAP.
KPMG has also established an IFRS Institute to address the needs of companies, investors and academics affected by the transition to IFRS.
“To enable an orderly transition to IFRS, auditors and registrants will need to be trained in the standards, audit committee members will need to understand how to address the implications of these reporting standards on their companies’ financial statements, and academia will need to adapt its curricula to educate the students of today, who will be the CFOs and auditors of tomorrow. Companies will need to assess how the new reporting standards affect their business, systems, processes and internal controls, and people,” says Janice Patrisso, KPMG Partner and Director of the KPMG IFRS Institute.
