Munter agreed, explaining that companies have different philosophies when it comes to adopting IFRS. Some stay anchored in their local GAAP, and work hard to minimize the differences between the older standards and IFRS. Others start with a clean slate and apply best practices to become more transparent.
For example, under IFRS, a companies that intends to become more transparent in its financial reporting may analyze what is happening with a lease agreement in terms of motivating factors and the risks and rewards the parties are incurring, rather than just using U.S. GAAP's bright line tests to record the transaction.
The SEC is getting a first look at how some companies handle the switch to IFRS. In November, the regulator eliminated the requirement that non-U.S. companies must reconcile their financial results with U.S. GAAP. So far, 37 companies have taken the option to report results using IFRS rather than GAAP.
The road to IFRS may be a bumpy ride, so panelists were vocal about what they thought should be a top priority for FASB and IASB: the conceptual framework.
The framework is a gargantuan joint effort by FASB and IASB to redefine major concepts, like full fair value and revenue. It is being developed simultaneously with the convergence project to merge U.S. GAAP and IFRS into a single set of global standards.
When completed, the framework's principles will "put pressure on fundamental elements of the financial statement — assets, liabilities, revenue and expenses," said Gannon. Indeed, without the framework, preparers and auditors "will be tempted to fall back on GAAP rules," posited KPMG's Munter.
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