GAAP vs. IFRS: New accounting rules could mean trouble
Posted by: admin in Industry NewsFiled under: International markets, Industry, Economic data
As if investors do not have enough to worry about, along comes another problem. There’s a growing movement to grant, perhaps eventually require, American companies and foreign companies trading in ADRs, to keep their books according to International Financial Reporting Standards, IFRS, instead of the venerable GAAP method we all know and love.
The move to IFRS makes a fair amount of sense given the global nature of capital markets. American investors will simply have to learn to read a balance sheet constructed using different rules. The problem looming on the horizon is, who will construct the IFRS balance sheets?
Currently, record-keeping degree programs in the U.S. are defined by the requirements for the CPA exam, which does not require familiarity with IFRS. American accounting faculty, overall an older group, instruct from textbooks geared towards the CPA exam. Unless and until the SEC actually publicly says a date by which U.S. companies can or must shift to IFRS, nothing will move. Potential accountants will not be exposed to IFRS as part of the curriculum. The CPA exam will not require familiarity with IFRS. Present accounting faculty won’t change their course syllabi or textbooks to include IFRS. Many might opt to retire rather than retrain and redesign their courses. Lead time for publishing a new textbook is at least two years, often longer. Who will write the new textbooks?
Conservatively, the SEC is looking at a five year lag once it finally establishes a date for the switch. At least we’ll all have plenty of time to get used to the idea.
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