Contributor: Dave Zdechlik
International Financial Reporting Standards (“IFRS”) are the standards being utilized by many companies around the world and IFRS is fast becoming the global accounting standard. The ultimate goal of IFRS is to put all companies on the same playing field when it comes to financial reporting. These standards will allow for the comparison of financial statements between companies no matter what country a company may be domiciled.
We continue to hear about IFRS, convergence, and global standards; but when will IFRS become a reality and be the accounting standard in the United States? This has been a very difficult question to answer. Originally, it was anticipated that the Securities and Exchange Commission (“SEC” or “Commission”) would make a decision in early 2011; however, the basis for the decision, the study of incorporating IFRS within the U.S. financial reporting system by the SEC staff, was delayed mainly due to the financial crisis. As such, no definite date has been published by the SEC regarding their decision; however, it has been stated that a decision is planned sometime in 2011. What does that mean? February 2011, June 2011 or December 31, 2011?
In February of 2010, the SEC staff published a “work plan” with the purpose of considering specific areas and factors relevant to the Commission’s decision in 2011. As proposed in the work plan, the SEC staff has been challenged to study and prepare a series of progress reports addressing the following areas:
- Sufficient development and application of IFRS for the U.S. domestic reporting system;
- The independence of standard setting for the benefit of investors;
- Investor understanding and education regarding IFRS;
- Examination of the U.S. regulatory environment that would be affected by a change in accounting standards;
- The impact on issuers, both large and small, including changes to accounting systems, changes to contractual arrangements, corporate governance considerations, and litigation contingencies; and
- Human capital readiness.
Pursuant to the work plan, the first progress report was to be completed during October of 2010 and that deadline was met. It was published October 29, 2010 (For a full copy of the report, go to www.sec.gov). The SEC staff will continue to report periodically on the status of the work plan.
The timing to require financial statements to be issued under IFRS will depend on the SEC making a decision in 2011. Because companies will need sufficient time for transition and conversion to IFRS, it is anticipated that the first year of IFRS reporting would be either 2015 or 2016 (If 2015 is the first year of adoption, currently for comparative purposes IFRS statements will be required beginning in 2013).
So when will you be required to implement IFRS? This will be dependent on a variety of factors. Some of these factors are the size of your company, how many years of IFRS comparable financial information will be required, and probably the most important – the date the SEC makes their decision.
Keep posted for further blogs on IFRS and how it may affect your organization.
SunGard iWorks IFRS Resources:
Did you know that the Securities and Exchange Commission (SEC) will be making an announcement in 2011 regarding the requirement that U.S. based companies adopt IFRS as the standard to be used in preparing financial statements?