By Miller, William F.; Becker, D'Arcy A.
The CPA Journal , Vol. 80, No. 8
The world is moving toward a unified set of accounting standards. Countries adopting International Financial Reporting Standards (TFRS) face many challenges including overcoming suspicions about the quality of information generated under new standards, concerns about giving up control over standards setting, and ensuring accounting standards support rather than disrupt economic activities such as lending and investing.
If the SEC mandates the replacement of U.S. GAAP with IFRS, one of the largest and most important obstacles to a successful transition will be educating the future accountants who will be responsible for implementing and auditing these new standards. Accounting educators should be able to teach LFRS the same way they now teach GAAP.
Accounting programs will need to make massive changes in the next several years if the United States transitions from GAAP to LFRS. Recent research suggests that everything accounting professors learned in college and while working in the profession and contained in the textbooks they own could change. Most evidence to date, however, shows that accounting professors are not at the forefront of these changes.
This article explains IFRS implementation background and investigates accounting professors' opinions about EFRS implementation at colleges and universities.
Countries have long had their own versions of GAAP, in part because GAAP development is influenced by local culture, educational systems, religious beliefs, and other country-specific factors. Because GAAP differences cause unnecessary noise in accounting information, a move toward accounting standard uniformity began in earnest in the early 1970s with the formation of the International Accounting Standards Committee (IASC). Since that time, economies around the globe have advanced and international markets have become commonplace, creating increasing need for global accounting standards. The benefits of common global accounting standards are clear, and as more and more countries abandon their versions of GAAP for IFRS, the costs of clinging to separate U.S. standards are growing exponentially.
Why hasn't the United States adopted IFRS during the last 40 years? One answer is that the United States has somewhat different needs for accounting information than other countries, and its accounting standards have developed differently than standards in many other countries. The U.S. economy has been driven largely by capital markets, whereas the economies of many other countries (especially developing countries) have been driven by credit markets.
Historically, where capital markets dominate, comprehensive financial reporting mechanisms (including auditing) are necessary, while outside reporting is not as important in markets predominantly driven by credit. This is one of the factors that has led some countries to value rulesbased accounting standards and others to value principles-based standards. The rulesversus-principles debate is one of the many reasons the United States has been cautious in jumping on the IFRS bandwagon.
While the SEC has not committed to when - or if - it will require the adoption of IFRS by U.S. publicly traded companies, the rest of the world is well on its way to having made IFRS the global accounting standard. As of June 2008, 12,000 companies in more than 100 countries were using some form of IFRS, and more than 150 countries are expected to have adopted IFRS by 2012. The list of countries already using IFRS includes some of the world's largest economic powerhouses, such as Australia, Canada, India, Japan, and the European Union. The United States is one of the last large capital markets to commit to making the switch.
SEC Positions on IFRS, 2007-2010
The SEC has taken some actions that indicate it will eventually require all U.S. public companies to move to TFRS. In November 2007, the SEC dropped the requirement that foreign private issuers reconcile their SEC filings to U. …