Pressure Mounts to Adopt IFRS, Demand for Talent Intensifies
U.S. companies need more preparation for the convergence of global accounting standards, according to a survey of CFOs and other senior finance professionals conducted by Deloitte. The survey finds that globalization of the world’s capital markets has triggered a shift away from local standards and benchmarks to global ones. According to Deloitte, one key example of this trend is the movement toward International Financial Reporting Standards (IFRSs) as a single set of globally accepted accounting and reporting standards. Right now, the push towards convergence is accelerating…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. Specifically, audit jobs exist for accoutants trained to audit IFRS financial statements.
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). Other countries are expected to follow suit over the next few years, including Chile (2009), Korea (2009), Brazil (2010), India (2011), and Canada (2011), according to Deloitte.
Moreover, Deloitte reports that 40% of the Fortune Global 500 companies currently use IFRSs, and that percentage is expected to increase significantly over the next couple of years since most companies outside the United States that currently use their home-country GAAP will be required to move to IFRSs.
The bottom line: almost every country, including the United States, will most likely be using IFRSs to some extent by 2011. According to Deloitte, “The globalization of the capital markets, the increasing global use of IFRSs, and the recent SEC activity are a wake-up call to U.S. companies that IFRSs should be taken seriously.”
More than half of those polled by Deloitte estimate that at least 25% of all U.S. issuers will be using IFRSs within the next seven years. Meanwhile, the survey results also show that companies believe their staff lacks sufficient knowledge about IFRSs to make the conversion and to maintain IFRS financial statements. Of those companies considering IFRSs, 64% say they lack skilled resources in their U.S. operations while 34% believe they lack skilled resources in their non-U.S. operations.
Narrowing the Gap
Many differences between IFRSs and U.S. GAAP have been narrowed as a result of the ongoing convergence efforts, says Deloitte. The report identifies several areas in which substantial convergence has already occurred: share-based payment, business combinations and segments.
Still however, the rules differ broadly on key topics such as inventory accounting, insurance industry accounting, when companies can recognize revenue and the use of fair value accounting.
Deloitte notes that although differences still exist, U.S. companies can more effectively train their professionals by leveraging current knowledge about U.S. GAAP and focusing on the key differences in principles and alternatives in IFRSs.
