International Financial Reporting Standards (IFRS) are issued by the International Accounting Standards Board (IASB), which was created in 2001. Previously, the International Accounting Standards Committee (IASC), founded in 1973, issued International Accounting Standards (IAS). When the IASB was created, it adopted the IAS and continued the work of the IASC. The IASB is working to harmonize accounting standards throughout the world to improve financial reporting for the global financial markets. The following are 20 common questions related to IFRS.
1. What Is the Current Status of IFRS Adoption in the United States?
Since November 2007, the SEC has allowed foreign companies to file their financial statements prepared on the basis of IFRS. No reconciliation to U.S. GAAP is required to be filed by these foreign companies. More recently, on August 27, 2008, the SEC released a proposal for public comment that could require mandatory adoption of IFRS beginning in 2014 (updated on November 14, 2008). The mandatory adoption could be phased in depending on company size. The proposal allows the largest public companies to adopt IFRS for periods ending after December 15, 2009. It will be voted on in 2011 ("AICPA Supports SEC Proposed Roadmap for Transitioning to IFRS for Public Companies," The CPA Letter, September 2008).
2. How Many Countries Have Adopted IFRS?
To date, 85 countries have adopted IFRS. Another four require only select companies to use IFRS. Israel, for example, requires IFRS for all companies except banks. Twenty-four countries permit the use of IFRS. This means that 113 countries either require or permit the use of IFRS. Central and South America are moving toward IFRS, as well ("Use of IFRSs by Jurisdiction," IAS Plus, Deloitte, www.iasplus.com/country/useias.htm).
3. What Is the Status of Converging U.S. GAAP with IFRS?
The FASB is working with the IASB on the convergence of a conceptual framework for accounting standards. The conceptual framework project has identified eight phases: Phase A - Objectives and Qualitative Characteristics; Phase B-Elements and Recognition; Phase C-Measurement; Phase D - Reporting Entity; Phase E - Presentation and Disclosure, including Financial Reporting Boundaries; Phase F - Framework Purpose and Status in GAAP Hierarchy; Phase G-Applicability to the Not-for-Profit Sector; and Phase H - Remaining Issues. A final issued document of Phase A is expected in the second quarter of 2009. Discussion papers for Phases C and B are expected in the third and fourth quarters of 2009, respectively. An exposure draft for Phase D is expected in the third quarter of 2009.
While creating a conceptual framework, the two boards are continuing their work on converging U.S. GAAP with IFRS. Several new accounting standards have been issued as a result of the project. (These are discussed under question 4.) Discussion papers have been issued for financial statement presentation, leases, and revenue recognition, with comment deadlines in the second quarter of 2009, and the expectation of a final document in 2011. In 2009, there should be final documents in the following areas: earnings per share, discontinued operations, subsequent events, hedging instruments, loan loss disclosures, disclosure of loss contingencies, and assets and liabilities arising from contingencies in a business combination (FASB, www.fasb.org).
4. What Standards Have Been Issued as a Result of the Convergence Project ?
The FASB and IASB agreed in 2002 to conduct a convergence project to more closely align U.S. GAAP with IFRS. The accounting standards shown in the Exhibit have been issued by the FASB to move U.S. GAAP closer to IFRS. The corresponding international standard is also listed. Although there may still be some differences in certain areas, these standards did move U.S. GAAP and IFRS closer together.
5. Have All the Differences Between U.S. …