Preparing for IFRS

Preparing for IFRS

By Valerie Lum, Trusted Professional Staff

The possibility of the Securities and Exchange Commission allowing foreign private issues to submit financial statements that adhere to International Financial Reporting Standards (IFRS)—instead of a U.S-based accounting standard—has caused many firms to redesign their infrastructure and left others wondering how to prepare for the inevitable.

Some of the large- and mid-size firms have started or completed transitioning from the U.S. Generally Accepted Accounting Principals (GAAP) to IFRS. But with a possible deadline of IFRS being required for U.S. companies as early as 2013, several NYSSCPA members raised concerns about whether recent accounting graduates will be prepared.

A Structure for Success

Kenneth W. Bosin, managing director for a major international investment bank in Manhattan and a member of the International Accounting and Auditing Committee, said his firm began IFRS conversion more than a year ago.

“IFRS conversion was a company-wide initiative,” he said. “The key was having the support of senior management and establishing a steering committee to help drive the process.”

The transition from U.S. GAAP is not a one time event, Bosin said. “It’s an ongoing process which is reinforced through intranet and classroom training.”

One Move at a Time

William M. Stocker III, a partner at a large Manhattan firm and chair of the International Accounting and Auditing Committee, said the conversion is gradually being implemented through the Financial Accounting Standards Board (FASB) one adjustment at a time.

“So even if it’s fast and furious, it’s still piecemeal,” Stocker said.

The SEC hasn’t set a date for U.S. companies to be IFRS-compliant, but Stocker said it’s clear that foreign companies are gravitating toward IFRS.

“We can handle a few projects now, but if suddenly 20 percent of our clients had to use IFRS, we would have a great deal of difficulty,” Stocker said.

Lori Catapano, a member of the International Accounting and Auditing Committee and auditor at a mid-size firm in Suffolk County, said her firm has kept abreast of changes in IFRS through its affiliation with DFK, an international association of independent accounting firms and business advisers.

“We saw it (IFRS) coming through our affiliation with DFK,” Catapano said. “So we saw the necessity to up our training program.”

Catapano said her firm is dealing with a handful of clients using IFRS, but larger companies seem to have the current experts in the field.

“I feel accountants are going to have to work with something they’re not familiar with,” Catapano said. “There’s going to be a huge learning curve.”

Waiting It Out

Liren Wei, managing partner of a small firm in Queens, regularly deals with clients that are either subsidiaries of a foreign parent or a domestic company with foreign subsidiaries. He said his company will not make the transition until it becomes mandatory.

“We’re prepared to make the switch when the time comes,” Wei said.

Planning for the Future

One of the concerns both Stocker and Catapano brought up was the lack of a curriculum in universities that emphasized IFRS for accounting students.

“School is geared toward the CPA exam,” Stocker said. “Because anyone who is a CPA had to pass the exam, they had to know GAAP. But no one tested on the IFRS.”

Catapano said she has been told that professors and teachers do discuss IFRS, but that they don’t get into the actual rules.

“I guess universities gear their curriculum for students to sit through the CPA exam, and right now it’s testing in U.S. GAAP,” Catapano said. “And until they change that, they’re not going to change the curriculum.”

Richard C. Jones, an associate professor at Hofstra University and member of the International Accounting and Auditing Committee, said international accounting is integrated in both the graduate and undergraduate curriculum. However the main focus is on accounting programs in the United States.

As the SEC discusses adopting IFRS, he added, the change in the Uniform CPA Examination will ultimately change the curriculum.

“Academic accounting programs will revise their programs to meet those demands,” Jones said.

Bill Roberts, director of media relations for the American Institute of Certified Public Accountants, said that if the SEC moves forward on a proposed rule, the AICPA would adjust the CPA exam.

“The AICPA would begin designing new questions for the exam that would probably be included in the test in 2010 or 2011.” Roberts said.

He also said the AICPA would look into assisting writers of college accounting books to include IFRS material.

Valerie Lum, staff writer, can be reached at vlum@nysscpa.org.