This blog is in response to a blog posted by Jack Sweeney on the Big Fat Finance blog. Sweeney likened fears regarding the IFRS changeover to the Y2K phenomenon while also suggesting that the switch to IFRS was "off". Red Moon Solutions' Kelley Lear shares her rebuttal below. Read the entire original post here.
While this was an interesting blog from Jack Sweeney, I must respectfully and wholeheartedly disagree – on both points. His supporting point as well as his main point. Having been technology project manager at a global $9.6 B company during Y2K preparation, I would have to say that we were definitely not being swayed by any media hype regarding doomsday predictions and computer infections ready to bring down the corporate world. We were however, very prepared to address not only all the possible failure points in every software and hardware application globally, but also were well-prepared to mitigate risk associated with other possible vendor solutions. In addition, our preparation time and planning allowed us to further test our Business Continuity plans in the event that something did happen. This was not “snake oil” that we bought from a shady salesman, it was internal planning…and it was invaluable. During the next decade, we were able to leverage all of that work for other contingency plans resulting from system challenges, political and natural disasters globally.
Regarding IFRS, I would have to agree with Jack’s quote that we would switch from using GAAP currently to today’s exact version of IFRS. I disagree that the switch is either “on” or “off”, or that like the ‘Y2K fear mongers’—IFRS has spawned its “army of “proselytizers who appear to be rather adept at the economics of fear”. Although his ‘pros’ here are quite entertaining, I think that we will end up with a version of IFRS that is somewhere in between, something of a “dimmer switch”.
Rational awareness of the issues and keeping abreast of IFRS’ direction is just a good business decision. Out in industry, there are a variety of sources to tap into that provide a somewhat non-biased assessments of the rulings and discussions around IFRS. I tend to read those as well as the what the Big Four provide—it is their business to be on top of every single thing that is said and written on the topic, after all. Though these firms will “profit” from fear mongers on this topic, as they will happily provide consulting services around planning and conversion, they have a wealth of free analysis and planning tools that require no commitment from corporations, other than reading and learning so that you can assess your own internal needs. See below for some of these links.
PriceWaterhouseCoopers (PwC) – has a section of their website dedicated to the facts. Separately stated are their opinions on those facts that you can choose or not choose to read.
I pulled out this high level overview from the PwC site to share with you all:
“Assuming that the SEC determines in 2011 to incorporate IFRS into the US domestic reporting system, a possible timeline may unfold as follows:
# Staggered adoption possible based on earliest adoption in 2015 or 2016
Key dates
Feb. 24, 2010: SEC issues statement in support of convergence and global accounting standards, inclusive of work plan
Mid-2011: Target date for completion of ASB / IASB convergence agenda
2011: Proposed SEC decision on IFRS
2012 - 2014: Possible effective dates of converged standards
2012 - 2014: Possible early adoption period
2013 - 2014: Earliest comparative information required, assuming 2015 beginning adoption date
Jan. 1, 2015: Possible beginning adoption date
2015 - 2018: Possible staggered adoption period
Here are a few other websites with IFRS information:
KPMG Institutes IFRS Information
Ernst & Young IFRS Information
Deloitte IFRS Information
I have been a part of many finance, tax and industry conferences lately. I’ve learned and seen firsthand that a lot of large global corporations are already well underway with education and planning, some even have many entities required to report locally under IFRS. This is genuinely smart. Regardless of where IFRS ends up, change is coming. There are definitive moves towards a common standard or at least some key areas of standardization globally that will require people, process and technology changes. I don’t think that anyone should be afraid, just prepared. Public Accountable Enterprises (PAE’s) in Canada are required to use IFRS by January 1, 2011, Brazil 2010, the UK 2012, and China is already there with a version of IFRS and more convergence planned.
Don’t turn off that switch and hide in the closet. Educate and prepare. Even small changes in accounting standards can have ripple effects throughout your financial, tax accounting and tax reporting and compliance. Turn that switch on, start reading, discussing and planning.
What do you think about IFRS? Let us know below.
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