International Financial Reporting Standards – IFRS – By US companies
The adoption of International Financial Reporting Standards (IFRS) by US companies will change the role of financial professionals. On November 14, 2008, the SEC published its proposed roadmap for US IFRS adoption, thus affirming the SEC’s focus on moving toward global accounting standards. In the roadmap, the SEC did not set a final adoption date, but rather set several milestones that, if achieved, could lead to mandatory use of IFRS by US issuers beginning in 2014. Early adoption is allowed for qualifying businesses for the period ending December 15, 2009.
The following are the highlights of the roadmap:
SEC Roadmap
* 2009- Early adoption allowed for qualified businesses for periods ending December 15, 2009
* 2011-SEC will assess early adopter success and progress against pre-defined milestones.
* 2014- IFRS filing for large accelerated filers for fiscal years ending on or after December 15, 2014.
* 2015- IFRS Filing for Accelerated Filers for Fiscal Years Ending on or After December 15, 2015
* 2016- IFRS filing for non-accelerated filers for fiscal years ending on or after December 15, 2016.
Regardless of when US companies are required to adopt IFRS, in the near term we can see a continued convergence between US GAAP accounting standards and IFRS, followed by a final conversion to IFRS.
An agreement between the Financial Accounting Standards Board (“FASB”) and the International Accounting Standards Board (“IASB”), called a Memorandum of Understanding (“MoU”), commits to improving both US GAAP and IFRS in 11 major subject areas, such as revenue recognition, leasing, consolidation, financial instruments, debt and equity. The effects of these accounting changes go far beyond financial reporting.
We believe adoption is inevitable and would also be in the best interests of investors and companies as they move towards a single set of strong global accounting standards that ensure greater transparency between nations.
Steps U.S. Companies Need to Take to Prepare for IFRS
-Understand the change: CEOs and CFOs of companies need to be aware of the impact of IFRS on the entity, as the change affects not only financial statements, but also other regulatory, legal or operational obligations that apply. based on financial information.
-Perform an initial evaluation: hire IFRS assessors to carry out a detailed and in-depth evaluation of the process and current practices.
– Impact on foreign subsidiaries – Consider how the new adoption of standards will influence business across international borders. It may be necessary to review long-term strategies, international taxation, financing and other processes.
-Corporate GRC (Governance, Reporting and Compliances)- Starting early is the key to avoiding large costs later.
-Solid planning: Companies must consider the short-term and long-term effect of the conversion and prepare a schedule to effectively integrate them into existing processes.
-Impact of IFRS on US companies Better transparency.
-Initial assessment of differences in GAAP and IFRS accounting is necessary within a company
-Advanced accounting and financial systems required for IFRS accounting
-The transition will require a lot of work, such as maintaining double ledgers, better reporting and information systems, and higher costs.
While the implementation of IFRS is focused on public companies, soon private companies will also adopt IFRS if they have foreign subsidiaries, foreign operations or foreign investors, etc.