The adoption of IFRS standards is well underway globally. PWC has a great map which provides integration details by country (http://www.pwc.com/us/en/issues/ifrs-reporting/country-adoption/index.jhtml). How these changes will affect your company specifically is not obvious. The impact varies based on business complexity, industry and geographic presence.
Following is a recommended approach on how to integrate the standard within your US Company. The approach is broken down between pre-approval and post approval –
Pre-Approval, i.e. now
- Collect available information and analysis from AICPA, SEC, and the Big 4.
- Determine the appropriate form of IFRS to adopt, based on your company, i.e. IFRS for Small and Medium Size Entities (entities without public accountability) vs. full IFRS.
- Identify the standards that represent a change in the way you track the financial success of your business, i.e. revenue recognition, expense recognition, assets, liabilities, financial liabilities and equity, derivatives and hedging, Consolidation, business combinations…
- Choose a team of experts within your company that will integrate the new standard, once approved.
These four activities can be completed internally, with little or no budgetary impact.
Within the US, the SEC reaffirmed its commitment to a global standard, but has yet to establish a timetable. The plan is expected in the next couple of months.
Post Approval, i.e. 2012
- Consider potential IFRS integration issues –
- Data gaps, i.e. new standards may require the tracking of data not previously collected;
- Entity consolidation not previously required; and,
- Accounting policy choices.
- Test the impact of these changes within your company.
- Develop a project plan and budget, with appropriate deliverable dates.
- Present the plan to your company Board of Directors to gain approval.
- Integrate the standards into your business through plan implementation.
- Issue IFRS 1 – established approach to issuing the first IFRS financial statements for your company.
In conclusion, with the time remaining prior to the SEC accepting the IFRS standard, a CFO should be studying the issue and increasing his/her knowledge base.
How are you preparing?© Copyright 2012 Regis Quirin, All rights Reserved. Written For: CFO Tips - What you need to know, to be a CFO TODAY!