A Report on the Roadmap and Roadblocks
to Implementation in the US and Abroad
Robert B. Shaw
Prof. Paul Strohmenger
GBA 521 - 002
Financial Accounting and Reporting
Fall Semester - December 2010
2) how is it progressing? 3) how does it differ from GAAP? 4) will it be implemented & how?
The International Financial Reporting Standards, otherwise widely known as the IFRS, are a set of high quality financial reporting standards that are designed to be used globally by profit making enterprises. The continuous development of such international standards is an example of the international harmonization witnessed in the global financial sector over the last two to three decades. The history of the IFRS only spans the length of a decade or so and can be best summarized by the following milestones. (www.ifrs.org)
In 2001, the International Accounting Standards Board (IASB) and the International Accounting Standards Committee (IASC) Foundation were formed. The next year the European Union passed regulation to adopt IFRS for listed entities in the year 2005. In addition, the FASB and the IASB signed the “The Norwalk Agreement” which was a commitment to reduce differences between US GAAP and IFRS. This was the beginning of all the conversion efforts that are presently in process today. By the year 2005, nearly 7,000 listed entities in Europe adopted IFRS. The following year brought about an announcement from the IASB regarding a “three year stable platform period,” in which entities that have already adopted IFRS will not need to implement new IFRS until 2009. In 2007, the SEC removed the reconciliation requirement for non-U.S entities reporting under IFRS. This single act brought about further pressure from all the parties in the global financial community to further support IFRS. A proposed roadmap was published in 2008 by the SEC which identified potential mandatory adoption of IFRS by U.S. Filers. Finally, the most recent major actions in relation to IFRS were the reluctance to fully support the roadmap to IFRS by the Mary Shapiro, the current SEC Chairman, and the Group of Twenty's (G20) support of IFRS as the most important step towards reforming the current global financial system. (www.iasb.org)
The IFRS was originally established by the International Accounting Standards Board (predecessor is the International Accounting Standards Committee? ) and its located in London, UK. The IASB is a full time organization, and functions independent of preparers, auditing organizations, and accounting agencies. The IASB has 14 board members which consists of a balance of financial industry leaders. These leaders are appointed based on their technical expertise as well as their experience in their respective fields. This ensures that the balance between these diverse groups produces a set of standards that satisfies the needs of the various users in the ever-developing, global version of the investor-creditor financial community. (www.kpmg.com)
It is now apparent more than ever that the world is attempting to come together in the accounting and financial reporting arena. As it stands, the US adheres to its own Generally Accepted Accounting Principles (US GAAP) while the rest of the world has gradually accepted that the IFRS standards are needed and welcomed. This is due to the fact that capital resources are required around the world. Therefore, investors need a uniform set of standards and this is further supported by the open acceptance by international organizations such as the G-20.
The original goal of the IASC was to have onset of standards so that every investor in the world would understand the principles that go into the creation of corporate financial reports and corporate financial statements.
Those in support of the IFRS argue that global accounting standards will improve the functioning of global...