The Long View on IFRS: Gerhard Mueller

Gerhard G. Mueller helped popularize the field of international accounting among academics and their students. His contributions have spanned many areas of accountancy, including teaching, research and professional service. Mueller, who is retired, has been a professor at the University of Washington, served as a FASB board member from 1996 to 2001, and is a past president of the American Accounting Association (AAA). He was an international accounting research fellow in the New York office of Price Waterhouse and has lectured in dozens of countries.

Mueller’s first major journal article, prompted by the approach of the 1962 International Congress of Accountants and published in the October 1961 issue of The Accounting Review, emphasized the international responsibilities accountants collectively needed to address. He felt it was unworkable for foreign companies whose securities were traded in the United States to have to produce two sets of financial statements. He proposed the creation of a permanent international authoritative body that would provide a structure of permanence to the international congresses, lead to international exchange of accounting information, support the advancement of accounting thought, and ultimately collaborate on international accounting and reporting practices.

Mueller was asked about the SEC’s proposed road map for the adoption of IFRS for U.S. public companies and the proposal’s implications for the profession. The following are excerpts from that interview:

Flesher: Can you outline your thoughts on IFRS and the recent push for acceptance of IFRS in the U.S.?

Mueller: Over the next five to 10 years, IFRS and U.S. GAAP will fully converge with only minor differences for some U.S. domestic quirks. I support the IFRS phenomenon strongly. The biggest challenge: get U.S. accounting education to embrace IFRS fully. That means a major change in educational patterns—and I have been there before. Do we need another Accounting Education Change Commission (AECC) to address the IFRS challenge? That might not be such a bad idea.

Flesher: Who would comprise such a commission?

Mueller: The [commission] might be constituted along AECC lines: representatives of major professional accounting organizations [for example, the AICPA, the National Association of Accountants, Financial Executives International, internal auditors and financial analysts], AACSB [Association to Advance Collegiate Schools of Business], a few highly visible accounting textbook writers, and a few AAA past presidents. Funding, maybe $5 million, might be sought from accounting foundations, the SEC and the NYSE. The AAA should have oversight.

Flesher: You used the phrase “will fully converge.” Is this really convergence, or is this simply the U.S. adopting IFRS, or perhaps IFRS taking over in the U.S.?

Mueller: My thought is that the “convergence” process is likely to remain a three-way affair: FASB will adopt some IASB positions outright, same thing in reverse, but for most standards there will be negotiation, background research, exposure drafts and finally a measure of compromise to arrive at full convergence. The fair value measurements issue fits this pattern.

Flesher: One of the problems facing the adoption of IFRS is the difficulty of getting the topic into textbooks. How big a problem is this, and what books are affected? Will it really make a difference in principles textbooks? It seems that it would mostly be intermediate and advanced accounting textbooks that would be affected.

Mueller: You are certainly right: The technical changes required are not all that earthshaking. But language and context need to change. Such change (that is, setting the tone) needs to start with principles, go right through intermediate and advanced, and then extend to auditing and tax courses. 

But change in higher education for accounting is like moving a cemetery—well nigh impossible. That is why I suggested earlier that another AECC might be called for.  If we had well-financed IFRS curricula at, say, two dozen schools, the feasibility of it all would be demonstrated. One reason that the former AECC was only moderately successful was what was then taught in doctoral programs. New faculty had no notion of the whys and wherefores of fundamental change.

I would abandon completely the teaching of separate international accounting courses at this time and seek full integration of IFRS throughout the curriculum.

Flesher: How do you prepare instructors to teach this, and how can instructors partner with publishers to create books that explain the transition and differences?

Mueller: Accounting instructor preparation would be just the same as it is at present with a new FASB standard, a new tax law or new SEC regs. If an “IFRS Commission” were to come about, it would show the way with examples at a dozen or so “demonstration” schools. One approach (with which I had nothing to do) was reported by professor Terry Shevlin, chair of the Department of Accounting at the University of Washington, Seattle, in the department’s fall newsletter:

We are employing a “compare and contrast” approach across the curriculum this coming academic year. The approach involves continuing to present the economics of a transaction, how U.S. GAAP accounts for the transaction and then comparing how IFRS accounts for the transaction. We will be using this approach across all financial accounting classes in the curriculum.

The publisher question no doubt will be answered by individuals contracting between the interested parties just as it is at present. I perceive no change in this respect from a shift to an IFRS framework.

Dale L. Flesher, CPA, Ph.D., is associate dean and Arthur Andersen Alumni Lecturer at the Patterson School of Accountancy at the University of Mississippi. His e-mail address is acdlf@olemiss.edu.