Represents huge shift for companies, educational priorities
NORTH BAY – The International Accounting Standards Board and the Financial Accounting Standards Board reaffirmed their intention in early June to prioritize the convergence between international reporting standards and the current United States reporting standards.
“In our November 2009 joint statement, we, the International Accounting Standards Board and the U.S. Financial Accounting Standards Board again reaffirmed our commitment to improving International Financial Reporting Standards and U.S. Generally Accepted Accounting Principles and achieving their convergence,” read the statement published by the two organizations.
To be in compliance with the Securities & Exchange Commission when it switches from U.S. GAAP to the international standards, accounting firms are continuing to train their employees in international standards.
Because there are so many things to learn, compliance is going to be the biggest issue, said industry experts.
The current plan is for the changeover to take place in 2014. But the SEC said it wants three years of comparative information, meaning if the changeover is confirmed, companies would have to begin to practice the standards as soon as 2012.
With the economy becoming increasingly global, pressure has been building for some time to move to a more universal statement system.
Once the European Union implemented the euro, it began the switch to a more universal way of reporting on financial statements, moving away from all of the countries having their own practices.
In addition to the extra work in accounting firms, this is an issue for schools as well.
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Elizabeth Capener is director of the undergraduate business program at Dominican University. She said the Big 4 accounting firms have told universities that they expect graduating accounting students to have at least some knowledge of the international standards.
One reason for this is that they want new hires to be prepared when and if the changeover happens. But beyond that, so many of these companies are international or have international subsidiaries, recent graduates out on the job market need to know now what these guidelines are to be in compliance with international standards.
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Elizabeth Stanny, an accounting instructor at Sonoma State University, said part of the difficulty is the uncertainty for educators.
She said that while firms want students educated in international reporting, the education materials are not set up and standards have not been set in the workplace.
So, she asked, “What should you be teaching?”
In addition to teachers beginning to address the international rules, the Public Company Accounting Oversight Board, most public accounting firms and many accountants working for private companies are participating in training, said Ms. Capener.
The two standards organizations are in the process of developing a modified strategy to take account of concerns from the industry and the SEC. Among other things, the groups intend to prioritize the major projects in the memorandum of understanding put out in 2008 to permit a sharper focus on issues, to stagger the publication of exposure drafts and related consultations and to enable the broad-based and effective stakeholder participation in due process that is critically important to the quality of their standards.
“We are limiting to four the number of significant or complex exposure drafts issued in any one quarter and to issue a separate consultation document seeking stakeholder input about effective dates and transition methods,” read the statement from the two organizations.
The two entities have begun discussions on this proposed strategy with their respective oversight bodies and regulators.
It is expected that this action by the FASB and IASB will not negatively impact the SEC’s work plan, announced in February, to consider in 2011 whether and how to incorporate international standards into the U.S. financial system.
That statement read, “The commission continues to believe that a single set of high-quality globally accepted accounting standards will benefit U.S. investors and that this goal is consistent with our mission of protecting investors; maintaining fair, orderly and efficient markets; and facilitating capital formation.”
The boards said they expect to publish shortly a progress report that includes a revised work plan.
