During the past decade, efforts to globalize financial accounting standards have accelerated not only globally, but also in the U.S. In fact, within the next five years, the U.S. Securities and Exchange Commission (SEC) will likely require that public companies in the U.S. switch from U.S. Generally Accepted Accounting Principles (GAAP) to International Financial Reporting Standards (IFRS). Mitigating this tremendous change is the FASB/IASB convergence project, which brings significant changes to financial reporting even if, contrary to expectations, the SEC decides not to mandate the use of IFRS.
Business as well as accounting professionals must begin preparing for this impending change in accounting standards. Accounting educators should take action immediately and prepare their students for this tremendous change, which will affect not only accounting, but also core financial aspects of all public companies.
This study is based on the successful integration of IFRS into the accounting curriculum at a major public university and discusses how to motivate students to learn about IFRS; presents background material for educators; outlines and discusses the type, content, and level of IFRS material that realistically can be integrated alongside U.S. GAAP starting with the first accounting course; and discusses challenges and opportunities that arise for students and educators. A list of valuable resources for educators and students to help keep abreast of current developments is also included.
Financial reporting in the U.S. is changing drastically. Within the next five years, U.S. public companies likely will have to switch from U.S. Generally Accepted Accounting Principles (GAAP) to International Financial Reporting Standards (IFRS). When this event occurs, the U.S. will join the more than 120 nations worldwide that currently require or permit the use of IFRS for financial reporting. The U.S. Securities and Exchange Commission (SEC), which has the legal authority to promulgate accounting standards for financial reporting in the U.S., and the Financial Accounting Standards Board (FASB), to whom the SEC delegated most of the standard setting process, support these efforts.
The ultimate authority to mandate or permit the use of IFRS in the U.S. rests with the SEC, which recently has taken very significant steps to support global standards. In fact, in 2007, the SEC issued a new rule that, for the first time, permitted non-U.S. companies that raise funds on U.S. capital markets to choose between IFRS and U.S. GAAP when filing financial reports with the SEC. In 2008, the SEC issued a "Roadmap" (SEC, 2008) that proposed a phased-in adoption of IFRS by U.S. public companies starting in 2014. After analyzing feedback received from financial statement users, preparers, academia, accounting organizations, and other stakeholders, in February of 2010, the SEC issued an update, reaffirming its commitment to the potential adoption of IFRS and including a detailed work plan to facilitate and further this goal.
Accounting students, the future accounting professionals, must be aware of what is on the horizon and must begin to learn detail about IFRS. Business students must understand the information presented in companies' financial statements, be aware of expected changes in U.S. financial accounting and reporting rules, and understand the implications of such changes for business entities and financial statement users.
Large public accounting firms are well aware of the importance of IFRS. The "Big Four" firms have spent millions of dollars educating their professionals, providing informational resources to organizations and other stakeholders, and through their foundations, providing educational funding. Graduates of accounting and other business programs who are knowledgeable about IFRS will enjoy a competitive advantage over those who do not possess such knowledge. …