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Knowledge of Global Accounting Standards Critical

By Susan Thetford, IASeminars Inc.

An in-depth knowledge of global accounting regulations is becoming ever more critical, as many countries, including all 25 members of the European Union, will require the adoption of International Financial Reporting Standards (IFRS) for the first time in 2005. For example, approximately 2,000 companies in the United Kingdom alone will need to convert from U.K. GAAP to IFRS this year using special transition rules covering past transactions and opening balances.

Adding to this challenge, approximately 10 percent of the companies listed on the NYSE and NASDAQ are non-U.S. companies, and the U.S. Securities and Exchange Commission requires these companies to submit either financial statements that conform to U.S. GAAP or financial statements prepared using other GAAP, like IFRS, accompanied by a reconciliation of earnings and net assets to U.S. GAAP figures.

As more and more companies are becoming global rather than just national entities, cross-border accounting compliance will remain a key element of doing business. American subsidiaries of foreign entities must follow the same accounting standards as their corporate parents, and for many, that means IFRS. Likewise, U.S. multinational entities seeking to enter new markets or to expand operations abroad may need to provide IFRS financial statements in order to obtain an operating permit or to raise capital.

In 2002, the FASB and the International Accounting Standards Board (IASB) reached agreement on a project to eliminate major differences between IFRS and U.S. GAAP. Although considerable progress has been made thus far, convergence of IFRS and U.S. GAAP is far from complete. Some of the differences still under review include accounting policies, construction contracts, investments in joint ventures, interim financial reporting, and research and development costs.

Beginning in 2005, all 7,000 EU publicly traded companies are required to apply IFRS in the preparation of their consolidated financial statements. In preparation for this sweeping change, the IASB completed its “stable platform” of standards in March 2004. New and revised standards included five new IFRSs and 17 amended IASs, resulting from the IASB’s Improvements Project and Phase I of its Business Combinations Project.

Since completion of the stable platform, the IASB has issued IFRS 6, Exploration for and Evaluation of Mineral Resources, and several interpretations of IFRS and amendments to current standards, including regulations on insurance contracts, financial reporting by small and medium-sized entities, disclosures for financial instruments, and financial guarantees and credit insurance, among others.

Society members interested in furthering their knowledge of IFRS and other international accounting policies are encouraged to attend any of four upcoming educational conferences to be held Oct. 24 to 28. To register for these events, visit www.nysscpa.org or call 800-537-3635.

Susan Thetford is an international instructor for IASeminars in Europe and the USA, as well as a consultant specializing in the implementation and application of International Financial Reporting Standards (IFRS) and International Standards on Auditing (ISA). An expert in bank accounting issues, she has presented conferences, seminars and workshops in the USA, the UK, Mongolia, Central Asia, Ukraine, and the Balkans. She is a CPA and was formerly the Midwest Regional Accountant for the Office of Thrift Supervision.