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财务管理会计外文翻译外文文献International Financial Reporting Standards: The Road Ahead By Langmead, Joseph M,Soroosh, JalalPublication: The CPA JournalDate: Sunday, March 1 2009In December 2007, the SEC eliminated the requirement to provide U.S. GAAP information for many foreign company filers that use International Financial Reporting Standards (IFRS). The SEC has also published a proposed rule for U.S. companies to start preparing their financial statements using IFRS. IFRS is effectively in the process of replacing U.S. GAAP in the U.S. capital markets - it has already replaced GAAP for non-U.S. companies listed in domestic markets, and will soon replace GAAP for U.S. public companies. These rapid developments will require CPAs to retool and learn more about IFRS quickly. Doing so requires an appreciation of why IFRS is of such immediate interest to U.S. businesses and practitioners, a familiarity with the history and background of IFRS. and an understanding of the key similarities and differences between IFRS and U.S. GAAP. This primer on IFRS concludes with some practical considerations for a company converting U.S. GAAP to IFRS.BackgroundWhy is IFRS back in the news? The FASB and the International Accounting Standards Board (IASB) have committed repeatedly - beginningwith the Norwalk Agreement of 2002 - to the convergence of the two bodies of standards on an aggressive timetable. U.S. accountants might have expected that all they needed to do was keep up with the changes to U.S. standards, which, in good time, would be the same as IFRS. If one wanted to keep up with the progress of the convergence effort, one could easily access SEC filings for some non-U.S. registrants using IFRS and review the required reconciliations to U.S. GAAP as convergence matured and the differences gradually disappeared.A passive approach may no longer be realistic. According to a December 2007 rule change by the SEC, many non-U.S. filers who use IFRS are no longer required to prepare reconciliations of their key financial statement amounts to U.S. GAAP. The last reconciliations for many IFRS companies were filed with the SEC for 2006, meaning that the only recent financial information on record is IFRS information. The visibility of those differences is lost. Furthermore, implicit in the new rule, the SEC has effectively acknowledged IFRS as an alternative accounting model for non-U.S. companies whose securities trade in U.S. markets. As long as IFRS and U.S. GAAP contain differences - as they certainly do today there are effectively two sets of acceptable standards in the United States.One might have taken some comfort in the fact that U.S. companies would continue to use U.S. GAAP. But that assumption is in the process of being dismantled. In 2007, the SEC issued a concept release as acompanion piece to the aforementioned new rule. The release examined issues1and questions - and invited comments - surrounding the striking scenario in which U.S. public companies, or at least some of them, would begin to use IFRS as their new accounting and reporting model. This release was much discussed and, after a vote by the SEC,a rale proposal was issued on November 14, 2008 (/rules/proposed/2008/33-8982.pdf), providing a "road map" for the full replacement of U.S. GAAP with IFRS for all U.S. public companies in a series of stages by 2016.These SEC initiatives put two parts of a widely accepted agenda at odds with each other: 1) a drive for a single, high-quality set of accounting and reporting standards appropriate for use around the world as soon as possible, and 2) continued pursuit of the more complicated and time-consuming process of convergence of U.S. GAAP and IFRS. Thefast-tracking of the former is plainly a priority at the SEC, even while the latter remains an active, albeit more gradual, agenda item. Unfortunately, the effect of too strong an emphasis on universality might be to decouple the two dimensions and, inadvertently perhaps, weaken the convergence effort or render it irrelevant.The SEC's 2003 study report, undertaken pursuant to section 108 (d) of the Sarbanes-Oxley Act (SOX), concluded that convergence should be a priority, but this conclusion was accompanied by a related overarching point already embedded in the language of SOX itself: The U.S. GAAPmodel was flawed - too "rules-based" and a more "principles-based" model should be sought as a replacement [SOX section 108 (d)(B)]. The study report cited several U.S. standards that rely on strict rales of application, thereby rendering them subject to circumvention. U.S. GAAP was thus deemed part of the problematic landscape that helped give rise to the debacles of Enron and WorldCom. IFRS was also flawed but, on balance, both SOX and the resulting study report made it clear that convergence should mean a movement away from the rules mentality of U.S. GAAP and toward the principles mentality more characteristic of IFRS. An optimal blend of the two extremes was labeled "objectives-oriented," and convergence was retargeted toward such a blended ideal. Nevertheless, despite the acknowledgment of the limitations of IFRS, the damage to the stature of U.S. GAAP was, it now seems, fatal. In this context, it is less surprising that IFRS, even in a notyet-converged state, should find acceptance at the SEC and come to represent the only real candidate to fill the need for a single global accounting model.The SEC is now moving to the point that, in retrospect, might have been inevitable since 2002-2003: active consideration of near-term adoption of IFRS by at least some U.S. public companies before convergence has matured. Even CPAs who otherwise have no direct responsibilities for public companies are nevertheless expected to know how to read their financial statements. Because we now face the likelihood that IFRS will become the primary accounting model for manyU.S. companies even before convergence, CPAs need to know at least the basics about IFRS.The International Accounting Standards BoardThe IASB, based in London, U.K., is the standards-setting body which establishes IFRS and issues related standards and interpretations. It was created in 2001 by its parent, the International Accounting Standards Committee Foundation (IASCF), and assumed the work product ofa2predecessor body, the International Accounting Standards Committee (which began around the same time as the FASB in 1973). A number of the predecessor standards - International Accounting Standards (IAS) - and interpretations of the Standing Interpretations Committee (SIC) remain in effect today along with the newer standards - IFRS - and interpretations developed by the International Financial Reporting Interpretations Committee (TFRIC). The IASB website contains much useful information about the board and includes summaries of each standard currently in effect(/IFRS+Summaries/IFRS+and+IAS+Summaries+English+2008/IFR S+and+IAS+Summaries+English.htm).The character and funding of the IASCF are matters of interest to regulatory bodies, such as the SEC, who evaluate the professionalism and independence of the standards-setting body. Likewise, the caliber and effectiveness of the related interpretive body (IFRIC) is of continuinginterest to such regulators who recognize that a robust andauthoritative interpretive capacity is required for a global body of standards to be implemented in a uniform and consistent manner across many jurisdictions. Any advisory bodies that might influence the agenda of the standards-setting body (a Standards Advisory Council plays such a role with the IASB) can become a concern if advisors are seen to have undue influence or to represent particular interests. The SEC and its fellow national/regional regulators around the world have influenced and will continue to monitor and influence the maintenance of quality at the IASB. On January 29, 2009, the IASCF announced the creation of a monitoring board made up of regulators from around the world-including the SEC, the International Organization of Securities Commissions (IOSCO), the European Commission, and the Japan Financial Services Agency - to oversee the work of its trustees.IFRS has gained acceptance in more than 100 countries. In many, itis either already the prescribed model for public (listed) companies or is on an agreed timetable to become so. The most noteworthy of these adoptions was that of the European Union, which chose IFRS (with the notable exception of a "carve out" of IAS 39, Financial Instruments: Recognition and Measurement) for the more than 7,000 listed companies in the EU, effective in 2005. The majority of economies in the developed world are now in the IFRS camp, with the United States poised to join them. IFRS has already effectively become the world standard.Conceptual Similarities and DifferencesIFRS is conceptually similar to U.S. GAAP in many ways, but thereare a few noteworthy differences between the two models. Like U.S. GAAP, IFRS is anchored in the accrual basis of accounting within a going-concern framework and requires financial statements of a type similar to those required by U.S. GAAP, with a balance-sheet focus. Terminology (and also taxonomy, for purposes of XBRL applications) can be different, but not overly obscure to English speakers familiar with U.S. GAAP. IFRS is a mixed-attribute accounting model, with historical cost elements,fair value elements, and other elements similar to recoverability and realizability, as in U.S. GAAP. Its basic orientation toward accountability to shareholders and other stakeholders is similar to U.S. GAAP. Standards are developed within a framework that can be fairly characterized as balance-sheet or asset-liability oriented, similar to U.S. GAAP.3Generally, IFRS has been developed with a cross-industry orientation.A standard for a given type of transaction is developed for application to all industries in which such a transaction might occur. U.S. GAAP, on the other hand, has developed many industry specific rales which permit the same kind of transaction to be treated differently, depending on the industry.Related to the cross-industry orientation of IFRS is its tendency to concentrate on the articulation of principles and to stay away from specific implementation prescriptions. It emphasizes substance over formand tends to avoid specific, brightline guidance. This is one reason why the total size of the IFRS literature is a fraction of the size of U.S. GAAP literature. IFRS developed with a tolerance for alternative accounting treatments within the same topical category or transaction type. While U.S. GAAP also includes some alternatives, IFRS has historically been more willing to tolerate alternative treatments in its standards, in the interests of incorporating as many legitimate views as possible and facilitating acceptance across borders as well as within countries with alternative precedents. Some older alternative treatments in IFRS have been gradually removed in recent years as the regulatory bodies of various countries, including the SEC, have generally regarded such alternatives as weaknesses.At the conceptual level, another difference is worth noting. U.S. GAAP contains no embedded permissions to override its standards in the interests of a fairer or more accurate result. The U.S. auditingliterature (Rule 203 of the AICPA Code of Professional Conduct) allowsfor this possibility and, while it has been applied to private companies, it has never been invoked for a public company. IFRS contains withinitself (IAS 1, Presentation of Financial Statements) the possibilitythat management may exercise a "true and fair" override of IFRSstandards when it is deemed necessary for an appropriate financial presentation.A good example of such a practice took place last year when a major European banking organization announced that a rogue trader had enteredinto financial transactions on behalf of the company which resulted in large, unauthorized positions. Adverse market conditions early in the year created losses in the positions, which became realized as the positions were unwound by management after being discovered. Some time later, the bank announced that it had completed its 2007 annualfinancial statements and that the huge trading losses incurred in 2008 were to be reflected in its 2007 accounts. The bank did not justify its position based on the particular IFRS standards applicable for such losses (LAS 10, Events After the Balance Sheet Date, and IAS 37, Provisions, Contingent Liabilities and Contingent Assets), but on the "true and fair" override provisions of IAS 1. As the FASB prepared the aforementioned new GAAP hierarchy standard for issuance last year (SFAS 162, The Hierarchy of Generally Accepted Accounting Principles), it explicitly considered and rejected the notion of such an override.Thus, there are strong conceptual similarities as well as some important differences between the two accounting models (summarized in the Exhibit). These differences can be viewed as conceptual strengths or weaknesses, depending on what one looks for in an ideal body of standards. As noted above, the 2003 SEC study report criticized both sets of standards, but on balance found more to like in IFRS.Critics of TFRS sometimes note that the standards are still rather young and untested over a sustained period, as different economic cultures around the world apply their respective takes to4its sometimes rather generic principles. U.S. GAAP is comparatively mature, has developed robustly in the face of repeated challenges, and has adapted to specific applications. A truly high-quality global accounting model should result in consistent application around the world, and IFRS is still a relatively new and unproven experiment inthat regard.Implementation ConsiderationsAs detailed above, the FASB and the IASB' s convergence efforts are unfinished; if convergence remains a priority, substantial changes to both sets of standards can be expected for years to come. Thus, a U.S. company should view the challenge of adopting IFRS from a number of perspectives. First, since full convergence is still a distant reality, any changeover in the near future must confront all the differences which still exist vis-à-vis U.S. GAAP. Appropriately trained controllers and their advisors can usually undertake this exercise with limited impact on the organization. Once the differences are identified, a deeper analysis of related implications can proceed. What are theeffects of a new financial reporting model on the many other legal relationships in which the organization is involved? What will be the impact on debt agreements and other financing arrangements that include financial statement measures and covenants based on them? What about profit sharing and other compensation plans and their relationship to financial measures? Financial statement measures permeate many company relationships, and a changeover to IFRS may significantly alter theserelationships. For example, there may be federal and state income tax implications arising from adoption of IFRS. A further example is a company's investments in other entities that are either consolidated or accounted for by the equity method. Those entities must also be measured using IFRS, thus introducing further sources of differences that may be unlike the differences applicable to the investor company.Once these determinations are made, a company can beginconsideration of all the key information systems and processes which would be affected by the new data requirements of IFRS. This can proceed as with any other impact assessment of new information needs, with appropriate specialists in information systems and database management, as well as those skilled in business process engineering. Both automated and manual processes need to be evaluated and potentially revised.A company can then articulate its training needs. As we have noted, any change to IT7RS in the near term will likely involve a meaningful number of differences from U.S. GAAP. For an entity to prepare and execute such a fundamental change, careful communication and training are essential for everyone involved.It should be noted that IFRS contains its own transition rules for initial adoption (IFRS 1, First-Time Adoption of International Financial Reporting Standards). The SEC has included additional transitional requirements in its final proposals. Generally, companies adopting IFRS for the first time use the IFRS standards in effect for the latest year and apply them retrospectively to one preceding year. The proposed SECrale requires that the traditional three full years of presentation be maintained in the year of adoption, with retrospective application totwo earlier years. Thus, an appropriately detailed transition plan will include careful consideration of the amount of historical information which may need to be developed.5Following the Road MapCPAs need to recognize now that IFRS is the world's de facto common set of accounting standards. Its penetration in the United States took a major step with the SEC's acceptance of IFRS financial statementswithout reconciliation to U.S. GAAP from foreign companies listed on U.S. exchanges. The next step is the use of TFRS by at least some U.S. companies in the very near term, pursuant to the SEC's recently proposed road map.The importance of being knowledgeable about IFRS has already become significant to U.S. accountants. The United States is home to many organizations that are affiliates or investees of non-U.S. entitieswhich require IFRS-based financial information. U.S. public companies themselves will have to use IFRS in a few years, according to the SEC's road map. Investors and their advisors, banks, vendors, and other users will need the expertise to read and understand BFRS financial statements. U.S. private companies may turn to IFRS voluntarily to be sure they are presentable to potential sources of global financing, as well as to potential acquirers. Their capacity to produce financial information inthe world's common accounting language will become increasingly important All these developments provide both urgent challenges and substantial opportunities for CPAs who understand and can apply IFRS.6。