THE FUTURE OF THE IFRS IN THE USA. IS THERE ONE?
Chartered Accountant, KPMG
To : ICAEW
Date : 11 November, 2013
International Financial Reporting Standards are designed as a common global language for business affairs so that company accounts and reports are recognizable and proportionable across international borderlines. They are notably influential for companies that have proceedings in numerous countries. They are increasingly substituting the many different national accounting standards with the goal that these standards will some day be globally accepted. Such adoption is expected that will be ...view middle of the document...
S. Financial Accounting Standards Board (FASB) have been locked in talks to align their rules for years. The work has become bogged down in technical debates and pressure from auditors – such as KPMG, PwC, Deloitte and Ernst & Young – to take time to get it right, but policymakers are losing patience as investors are left waiting.
Even though the IFRS has been adopted by so many countries and its advantages are very well known, USA still holds on to their GAAP. A matter that has been in the highlights in the finance world for quite a while now, is whether or not USA will adopt the IFRS, and if yes, when will that be. Why is that though? It may be that there are sufficient similarities between US GAAP and IFRS, (for instance with the presentation of financial statements); that far too many world-weary American finance workers, organizations and universities having may not want to expend the financial resources, and energies necessary to learn more .
Then again, is having one globally accepted set of standards really the best idea? Having one financial language that will suit every single operation in the global setting is quite unfeasible. Having different dialects can be a more approachable decision. What suits one company does not necessarily suit another.
As there is no right or wrong answer when it comes to accounting there are several opinions about whether adopting IFRS is beneficial or not. While a lot of professional bodies support the idea of having one global set of standards, there are opinions against it as well. Is it really feasible? Is the timing right? After everything the USA has been going through since the financial crisis began in 2007, a lot of people support that changing the standards at this period of time may not prove to be wise. Furthermore, while international standards are very applicable when it comes to firms raising capital in international markets, there are also times that may seem not as applicable when it comes to other companies especially the smaller ones. Additionally, having only one set of standards requires a great deal of constant regulation. If lack of global regulator exists to make sure that a steady transition and imposition occurs this can lead to a reduction of such benefits gained. Sue Almond, Technical Director at ACCA says: 'More investors believe the eventual adoption of IFRS in the US will result in a net benefit to the US economy than not’’.
In theory, GAAP and IFRS are not so different from each other. Like IFRS, GAAP was intended to be a principles-based system of accounting. But in reality, GAAP has evolved to be far more rules-based than its international counterpart. Despite several years of convergence efforts, significant differences remain between GAAP and IFRS.
What is the next step?
Because the USA is still hesitant on whether or not to go ahead and agree to the adoption , this is causing the IFRS to face some challenges. Even though 14 out of the 20 countries in the G20...