Comparability in International Accounting StandardsâAn Overview
You will be asked to answer eight randomly selected questions from a pool of more than The questions are based on the information in the. Enhancing Relationships and Communications with Other National Standard Setters The bilateral FASB and IASB convergence program increased the quality of reporting Recent experiences raise questions about that conclusion. Questions and Answers | Developed by American Institute of Certified Public When comparing IFRS and GAAP, what are some overall key differences I should .
Some textbooks are already covering IFRS, primarily in a comparative presentation to their instructions on U.
Remarks at the Financial Accounting Foundation Trustees Dinner
New textbooks covering IFRS are currently being written and should be in circulation in the reasonably near future. What are the likely costs of converting to IFRS? The costs would be determined largely by the size and nature of the respective company. While the initial cost to identify and quantify the differences between U. GAAP and IFRS, staff training and implementing IT support could be significant, the conversion also could result in an ultimate reduction of costs for capital and financial reporting related to operations.
In its proposed roadmap to move all U. What should I do now? The bottom line is that CPAs need to begin to prepare for the day in the not-so-distant future when the Securities and Exchange Commission could designate a date for voluntary, or even mandatory, adoption of IFRS by all U. Also, be aware that the way financial statements are prepared differs based on whether a company is using IFRS, U.
The simple answer is no. All the discussion thus far about the possibility of the Securities and Exchange Commission designating a future date for voluntary, or even mandatory, adoption of IFRS has been for U. That said, many privately held companies adopted provisions of the Sarbanes-Oxley Act, such as the formation of independent audit committees.
Many might take similar action regarding IFRS, even if they are not mandated to do so. The panel will provide recommendations on the future of standard setting for private companies, including whether separate, standalone accounting standards for private companies are needed.
International Financial Reporting Standards - Questions and Answers
A report is expected in the early part of That removed a potential barrier and gives U. The eventual adoption of IFRS by small businesses and not-for-profit organizations is likely to be market driven.
The IASB has developed a version of IFRS for small and medium-size entities that would minimize complexity and reduce the cost of financial statement preparation, yet allow users of those entities' financial statements to assess financial position, cash flows, and performance.
By creating high-quality standards through a best-in-class standard-setting process, the FASB serves as a reference point and benchmark for others. In other words, we will continue to lead by setting an example of excellence.
This also would enhance international comparability for the benefit of investors and other capital market participants. This evaluation happens on a standard by standard basis. In some cases, however, the FASB or other national standard setters may conclude that the best interests of its own capital markets outweigh the goal of completely converged accounting standards.
Sincesignificant progress has been made toward achieving greater comparability in accounting standards on an international level. The increasing number of countries around the world that have decided to require or permit the use of IFRS has increased the comparability of reporting internationally. The bilateral FASB and IASB convergence program increased the quality of reporting standards and enhanced the comparability of these standards in a number of important areas, including the accounting for business combinations, share-based payment transactions, fair value measurement, and revenue recognition.
But increasing the comparability of standards is not easy. And consistent application of accounting standards is fundamental to the efficacy of the standards and, more importantly, to maintaining fair and efficient capital markets. Consistent implementation and application of the new revenue recognition standard will require careful consideration of the questions that we all know will arise during the transition from the old standard to the new one.
To strengthen this effort, the FASB has created an implementation group of stakeholders to serve as a resource to address implementation issues as the transition to a new revenue recognition standard occurs. Implementation of any new standard is a collective effort and one that needs thinking from a cross-section of affected participants — preparers, auditors, investors, regulators, users, and other stakeholders — as well as from members of the IASB and FASB. And the SEC has an important a role to play.
The staff will actively monitor implementation of the new standard to help limit inconsistencies in application and will also seek out the views of investors, issuers, auditors, the PCAOB and others. Today, over companies representing trillions of dollars in aggregate market capitalization report to us under IFRS with no reconciliation. And the SEC staff enforces those standards. By any measure, we have thus demonstrated a major commitment to the use of IFRS in our markets.
But, the question remains — what about domestic issuers? As I am sure you are all aware, partly because you have heard me say it before, during my first year at the Commission, we have been intensely focused on making meaningful progress towards completing the statutorily mandated rulemakings from the Dodd-Frank and JOBS Acts.
And that is still a major goal. And, it continues to be. I strongly agree with these sentiments. But there are other questions we are being pressed to answer by, among others, our international regulatory and accounting counterparts. They want to know whether, and, if so, when and how is the United States — and more particularly the SEC — going to incorporate or otherwise speak again as a Commission to the issue of further incorporation of IFRS into the domestic capital markets.
The Commission last spoke on these questions in February when it said that: I cannot answer these questions tonight — while we continue to consider the issue.
But they are important to answer and I hope to be able to say more in the relatively near future. Enforcement Turning back to the SEC and FASB work on accounting standards, it is important to spend a few minutes discussing enforcement of the standards. The SEC enforces U. GAAP as developed by the FASB to ensure that issuers are meeting their financial reporting obligations under the federal securities laws.
Enforcement happens primarily in two ways. When Corp Fin believes that a company could enhance its disclosure and improve its compliance, they issue comments advising the company to revise its disclosure.