The large majority of CPAs in the United States have some knowledge of IFRS—the emerging, globally accepted set of accounting rules, according to a recent AICPA survey.
The
survey also indicated that many CPAs have begun to develop greater
expertise, as American and world authorities work to converge U.S.
standards with global principles. At the same time, the SEC is
suggesting a plan to incorporate IFRS into the U.S. financial
reporting system.
“We’ve seen significant movement in the readiness of U.S. CPAs
for introduction of IFRS in the U.S. over the three years since 2008
when we first introduced our website IFRS.com and began this
tracking survey,” said Arleen Thomas, AICPA senior vice
president—Member Competency and Development. “While most AICPA
members still support adoption of IFRS, our survey shows a slight
reversal in readiness gains as CPAs await progress in the
convergence of U.S. and international standards and a clear timeline
from the SEC.”
Seventy-six percent of CPAs working in public companies are delaying preparations to adopt IFRS until the SEC issues a decision. That’s up 13 percentage points from 63% who were delaying six months ago.
The latest IFRS Readiness Survey was conducted via Internet poll between April 19 and May 11 with 1,351 respondents and a margin of error of less than plus-or-minus 3 percentage points.
The survey shows that 78% of CPAs already have some knowledge of IFRS. The level of familiarity ranges from a rudimentary understanding of high-level concepts to enough expertise to train others.
The survey also shows that approval of U.S. adoption of IFRS is strong: 53% support an SEC mandate requiring use of IFRS in the U.S. and another 23% think IFRS should be offered as a financial reporting option for public companies.
Seventy percent of those surveyed said they were aware that
FASB and the International Accounting Standards Board (IASB) were
working this year to converge U.S. and global standards on revenue
recognition, leases and financial instruments. However, large
majorities were unsure whether the proposed new standards and
accompanying guidance in these areas would be improvements over
existing standards.
The survey was conducted prior to the SEC’s publication on May
26 of a paper exploring a possible method for incorporating IFRS
into U.S financial reporting through what’s being commonly referred
to as “condorsement”—the combination of “convergence” and
“endorsement.” The concept was first proposed in December by SEC
Deputy Chief Accountant Paul Beswick at the AICPA’s National
Conference on SEC and PCAOB Developments in Washington.
Under this approach, FASB and the IASB would work to finish their joint convergence projects. After completing those projects, FASB would incorporate newly issued or amended IFRSs into U.S. GAAP, pursuant to an established endorsement protocol. Similar to other jurisdictions, the endorsement protocol would provide the SEC and FASB the ability to modify or supplement IFRS when in the public interest and necessary for the protection of investors.
In the survey, only 16% of respondents said that they had
heard of the “condorsement” model proposal. The SEC has requested
feedback on its “condorsement” framework by July 31.
Since 2008, the SEC has allowed foreign companies to report using IFRS without reconciliation to U.S. GAAP so it’s not surprising that familiarity with IFRS is highest among those CPAs who work in foreign-owned public companies. Fifty percent of CPAs working for foreign-owned public companies and 39% in foreign-owned private companies have already adopted IFRS or are ready to adopt.
For U.S. firms, the survey shows that CPAs are poised to take
next steps but are still holding back. Nearly half–48% of CPAs
working for U.S. public companies--foresee a need for advanced or
expert level knowledge of IFRS and 32% have begun actively preparing
for adoption. Another 18% are planning to adopt IFRS.
Respondents are about evenly split about the pace of change for IASB-FASB convergence: 30% said it’s too fast, 36% said it’s about right, and 28% are unsure. Only 6% think the pace of change is too slow.
Fifty-one percent of respondents believe a 2015-16 adoption date would allow enough time for implementation. Seventeen percent said that would not be enough time, and 32% are unsure.
The survey also asked respondents if they were aware that the IASB has issued an IFRS for small and medium-size enterprises. Fifty-three percent said they are aware of the standard for SMEs, and 30% said they would consider adopting it or would advise their clients to consider adopting it, but most would only consider this if IFRS were required for public companies.
On Feb. 24, 2010, the SEC approved a statement of support for global accounting standards and outlined a Work Plan for the continued consideration of incorporating IFRS into the financial reporting system for U.S. issuers. The Work Plan envisions 2015 as the earliest possible date for the required use of IFRS by U.S. public companies.
The Work Plan addresses a number of areas of concern, including the following:
- Determining whether IFRS is sufficiently developed and consistent in application for use as the single set of accounting standards in the U.S. reporting system.
- Ensuring that accounting standards are set by an independent standard setter and for the benefit of investors.
- Investor understanding and education regarding IFRS and how it differs from U.S. GAAP.
- Understanding whether U.S. laws or regulations, outside of the securities laws and regulatory reporting, would be affected by a change in accounting standards.
- Understanding the impact on companies both large and small, including changes to accounting systems, changes to contractual arrangements, corporate governance considerations and litigation contingencies.
- Determining whether the people who prepare and audit financial statements are sufficiently prepared, through education and experience, to convert to IFRS.
Introduced in fall 2008, the IFRS Readiness Survey is a semi-annual survey of AICPA members working in the Public Practice and Business & Industry sectors that gauges the level of knowledge members have about IFRS and the progress their organizations are making toward implementing IFRS. The AICPA uses results from this survey to help shape resources for members and to inform advocacy efforts.
More information on IFRS is available on the AICPA’s website www.ifrs.com.
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