Bruce Pounder, CFO.com | US
July 29, 2010
Bonnie, the jobs of U.S. accounting and finance professionals are indeed at great risk, and the possibility of U.S. companies adopting IFRS is only one of the reasons. I devote five chapters in my "Convergence Guidebook for Corporate Financial Reporting" (Wiley) to explaining of all the reasons why the labor market for financial-reporting talent will become "hypercompetitive" in the near future, and in the final chapter I explain how U.S. professionals can deal with the personal career implications.
Posted by Bruce Pounder | Aug 5, 2010 1:02 AM ET
Christine, I share your concerns about the consequences if U.S. companies were forced to adopt IFRS. However, as I have focused on in past columns and will focus on in my next column, the likelihood that U.S. companies will be forced to adopt current IFRS is zero, and the likelihood that U.S. companies will be forced to adopt future IFRS is very low. I encourage U.S. CFOs to spend less time worrying about being forced to adopt IFRS and spend more time understanding the profound changes that are occurring in the U.S. financial reporting environment.
Posted by Bruce Pounder | Aug 5, 2010 1:01 AM ET
John, you raise a number of points in your comments, some of which we agree on and some of which we don't. Thank you for taking the time to read my column and comment on it.
Posted by Bruce Pounder | Aug 5, 2010 1:00 AM ET
Joe, I know a lot of folks believe what you asserted, i.e., that "Mark to market is a cornerstone for International Financial Reporting Standards." I don't concur. In particular, the IASB's proposed changes to accounting for financial instruments call for significantly less use of MTM than the FASB's proposed changes call for. Regardless of whether MTM is good, bad, or neutral, its use in IFRS is simply not as pervasive as many people have been led to believe it is.
On the other hand, I wholeheartedly concur with your comment that "IFRS is not as inevitable as the global accounting firms want it to be," but for reasons that have nothing to do with MTM. My next column will address that issue very directly.
Posted by Bruce Pounder | Aug 5, 2010 12:59 AM ET
Bruce, I'm assuming your question relates to the benefits a private company that operates only in the United States might experience if it were to voluntarily convert to using full IFRS. All other things being equal, at this time there aren't any significant, concrete benefits for such companies, especially after the costs of conversion are taken into consideration. While some folks claim that IFRS is always better for all companies everywhere, I'm not one of them.
Having said that, financial executives in private U.S. companies should be aware of the profound impact that IFRS-related phenomena are having and will have on the U.S. private-company financial reporting environment. CFOs in the United States will have to deal with the impact of IFRS even if their companies never convert to it.
Posted by Bruce Pounder | Aug 5, 2010 12:58 AM ET
I believe that positions such as the one that I currently hold may be part of the "significant costs" that the writer of this article says can be saved with the move to IFRS.
With India making a move to quickly adopt IFRS, can the move to replace US Accountants/Financial Analysts with "cheaper" labor come far behind? IFRS may not be a threat to US businesses, but it is a threat to the US jobs and thus eventually to the economy as well.
I do my job very well and keep up to date with the new standards and have been actively involved with the IFRS committees at my current employer, but in the end, I am not sure how much additional employment this will buy since the labor is much cheaper and will at least appear to be equally qualified to perform most aspects of management accounting, auditing, financial statement presentation and so on.
So I do see it as a significant threat on a more personal basis.
Posted by Bonnie Wehler | Aug 3, 2010 6:48 PM ET
Regardless of the author's opinion on the topic, it appears that implementing the IFRS standards would cost more than it would be worth (same as SOX implementation). How many more regulations (reporting and otherwise) must companies comply with? The current reporting burden for public companies is already too high (and the new rules just passed by Congress won't help either).
Posted by Christine Levine | Aug 2, 2010 9:59 AM ET
I oppose the implementation/adoption/convergance with IFRS for the following reasons:
1. As it is stated in the article, every country has created "carve-outs" to tailor the standards to their economy, or way of doing business, thereby reducing comparability.
2. Research shows that countries using IFRS have higher rates of fraud etc. Now, whether or not this is due to IFRS, who knows. It may be due to the fact that IFRS is principles-based, using more professional judgment, thereby reducing comparability again (because your professional judgment may very well differ from mine, so where is the consistency?).
3. Of course, the Big 4 and other accounting firms will be Pro IFRS because of the fees they will be able to charge for implementation guidance (which will prove to make the costs spent on SOX fail in comparison).
4. Based on #2 above, I would assume that GAAP has done a superb job of preventing fraud in the U.S. when compared to other countries. We have one of, if not the best, financial reporting system in the world, so why change? Why not have other countries adopt U.S. GAAP?
5. Proponents of IFRS cite its reduced volume of guidance. Step back and think about where the guidance has come from. Have we, as a profession, not asked for this guidance, if for nothing else, to protect ourselves in an effort to provide the most reliable financial information to the public (serving the public interest)?
Posted by John Schmidlin | Jul 30, 2010 11:17 AM ET
Mark to market is a cornerstone for International Financial Reporting Standards. MTM was a contributing factor to the man created disaster we refer to as the financial crisis of 2008. FASB adopted MTM in 2006 and the financial system imploded in just two years.
Unless the International Accounting Standards will consider replacing MTM with Lower of Cost or Market with MTM disclosures in the footnotes, IFRS is in an extended stalmate - IFRS is not as inevitable as the global accounting firms want it to be. Global accounting firms stand to reap billions in consulting fees if IFRS is mandated in the USA.
Posted by Joe Jefferis | Jul 30, 2010 10:19 AM ET
My guess is there are no advantages for private domestic companies, and the financial benefits exist primarily for private international companies.
Would there be any financial advantages for private domestic companies?
Posted by Bruce Butler | Jul 30, 2010 8:29 AM ET
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