October 2008


IFRS set to become the global accounting language

There are currently 112 countries which use IFRS, and by 2011 there will be 150. Canada, India, South Korea and Japan are among those countries planning to adopt IFRS by 2011. The most notable exception is the US which currently does not permit listed companies to use IFRS although unlisted companies may do so.

US GAAP runs to about 25,000 pages ten times the length of IFRS and while IFRS is principles-based and requires judgement by an accountant, US GAAP is more rules-based and lends itself to box-ticking. US GAAP includes guidance for specific industries, which IFRS tends to avoid. There are still fundamental differences in specific areas, such as inventories and fixed assets.

In November 2007 the Securities and Exchange Commission (SEC) announced that it would allow overseas companies with a listing in New York to file their financial statements using IFRS and with no reconciliation to US GAAP. There remains the issue. That this only applies to companies which prepare their accounts using full IFRS and not the slightly different version of IFRS adopted in the EU.

In August of this year came the most significant development yet. The SEC unveiled a roadmap for full adoption of IFRS by US companies. Provided that certain conditions are met by 2011, US companies will report under IFRS by 2014 with a select group of companies being allowed to adopt IFRS early. The SEC will effectively hand over authority for accounting standard setting to the IASB, and IFRS will become the single global accounting language.

Although 2014 seems a long way off, US companies need to start planning now. The change will affect not only reporting but systems and processes, tax, debt covenants and contracts. Many US companies have overseas subsidiaries which already report under IFRS, and for them the change will be easier.

The seminar, The Essential Guide to International Financial Reporting Standards, demonstrates what needs to be done to implement IFRS successfully. It helps recognise the key differences between UK GAAP and IFRS, and also where US GAAP is not in line with IFRS.

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