IFRS is Going to Replace GAAP -Sooner Rather Than Later - PhoenixCEOCFO.com

IFRS is Going to Replace GAAP -Sooner Rather Than Later

Securities and Exchange Commission (SEC) Chairman Christopher Cox, in a speech in February 2008 said that U.S. companies will use International Financial Reporting Standards (IFRS) rather than GAAP. He told members of the European-American Business Council that the SEC is working on a road map for transitioning U.S. companies to the IFRS as reported in CFO magazine.

The change might start as early as 2011, the year by which a number of large U.S. multinationals told the SEC that they would be prepared to switch their U.S. accounting systems to IFRS. The three-year time frame would be equal to the one given to companies in the European Union (EU) that were required to change from their local accounting principles to IFRS in 2005.

Click here to learn about a presentation on IFRS, GAAP and International Tax Updates on August 15th, 2008 - http://www.phoenixceocfo.com/content/ifrs-gaap - 4 hours of CPE.

In addition, 2011 is the same year that China, Japan, India and Canada are following the EU's lead, as noted by Sarah Johnson of CFO magazine. She reported that Margaret Smyth, Controller of United Technologies Corporation is having her international subsidiaries use IFRS.

In 2007 the Financial Accounting Standards Board chairman Robert Herz called for a timetable for moving U.S. companies to IFRS. He believes IFRS will take over U.S. GAAP as the globally accepted accounting principles worldwide.

Big Four accounting firm, Deloitte, reported that interest from finance executives in adoption of IFRS has increased by 30%, up from 20% since December 2007. Big Four Accounting firm, Ernst & Young believe that the move to IFRS is the single most important initiative in the financial reporting world.

IFRS are standards and interpretations adopted by the International Accounting Standards Board (IASB) and many of the standards were from the International Accounting Standards (IAS). IAS were issued between 1973 and 2001 by the board of the International Accounting Standards Committee (IASC). In April 2001 the IASB adopted all IAS and continued their development, calling the new standards IFRS.

"It's clear to us that a number of companies have an interest in IFRS, and that interest is growing," said D.J. Gannon, a Partner with the Deloitte, in their June 2008 press release. "As more companies outside the U.S. report using IFRS there will likely be increasing pressure on U.S. companies to do the same in order to stay competitive in increasingly global capital markets."

One thing is clear is that the switch to IFAS will be costly and time consuming. Planning should start sooner rather than later.

John Laub is the Chairman of the Phoenix CEO-CFO Group.


1. "Companies Cozying Up to IFRS. Deloitte Claims Interest is Growing, with 30 percent of Finance Executives Considering its Adoption, up from 20 Percent Just Six Months ago." Alan Rappeport. CFO.com. June 24, 2008.

2. "IFRS: No Longer If, but When. The SEC Will Release a Time Line Later This Year for Allowing U.S. Companies to Use International Financial Reporting Standards."
Sarah Johnson. CFO.com. February 8, 2008.

3. "International Financial Reporting Standards." Wikipedia. July 3, 2008.

4. "IFRS: a Strategic Opportunity." www.ey.com

5. "IFRS Adoption Gaining Momentum, But U.S. Companies Need More Preparation And Education: Deloitte Survey. Thirty percent of Companies Would Consider IFRS According to Deloitte." Deloitte Press Release. www.deloitee.com. June 19, 2008.

6."Remarks on Acceptance of the Atlantic Leadership Award from the European-American Business Council." Speech by SEC Chairman Chairman Christopher Cox. U.S. Securities and Exchange Commission. Willard Hotel Washington, D.C. February 1, 2008.

7. "The SEC Agenda for 2008." Speech by SEC Chairman Christopher Cox. U.S. Securities and Exchange Commission. Remarks to the 'SEC Speaks in 2008' Program of the Practicing Law Institute. Ronald Reagan Building and International Trade Center Washington, D.C. February 8, 2008.

8. "International Accounting Standards: Opportunities, Challenges, and Global Convergence Issues." Statement by Robert H. Herz. Chairman Financial Accounting Standards Board Before the Subcommittee on Securities, Insurance and Investment
Committee on Banking, Housing, and Urban Affairs United States Senate on October 24, 2007.