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IFRS: What’s Next?

August 4, 2009

The preliminary Roadmap to IFRS was issued by the SEC and commented on by accounting professionals, investors, academia and others. The SEC, who issued the Roadmap in the first place, is now led by a new chairman who seems more interested in enforcement than in a single set of high-quality global financial reporting standards. Economic concerns have taken center stage, which may lead to delays in the mandatory IFRS adoption date. Despite all of these concerns, I remain convinced that a US move to IFRS will still occur. My expectation is that the SEC will need to move forward with a revised Roadmap to IFRS later this year. It would not surprise me to see a delay in the mandatory adoption date. IFRS is coming. The issue is when will it be required, not if it will be required. How shall we prepare for IFRS’ eventual arrival while we wait for the SEC to make its move? Consider these ideas as you begin to prepare.

Stay Current on the IFRS and US GAAP Convergence: The US GAAP side of the convergence are the accounting standards we use now. We need to stay on top of the convergence because it will help us now and as we begin to transition to IFRS.

Keep up with Global Conversion to IFRS: Non-US subsidiaries are being impacted by IFRS. As more countries convert to IFRS, foreign pressure on US companies and US capital markets will continue to rise. Virtually every large country is currently utilizing IFRS or will be by 2011. Large multinational companies will need to deal with their non-US subsidiaries IFRS reporting requirements.

Stay IFRS Aware: As the transition to IFRS ramps up, stay engaged on learning about IFRS. Use this time to educate your staff and yourself about IFRS.

Perform an IFRS Impact Assessment: Perform an IFRS Impact Assessment to determine how the transition to IFRS will affect your company. You could also hire a third party with IFRS expertise, like Jefferson Wells, to perform the Impact Assessment for you.

Begin to Identify Key Employees who Could Participate in Transition Teams: The transition to IFRS will affect many areas of your company. The transition process is best handled by multiple teams with a central steering committee and a hands-on project manager. Many disciplines will be required for the most successful transitions.

Begin to Develop a Judgment Framework: A judgment framework will help guide decision making as Accounting Standards move from rules based to principles based.

Monitor Rule Making Activities: Someone in your company should monitor the activities of the SEC, the FASB and the IASB. By being aware of rule-making activities your company can be informed as you begin to plan your transition.

Learn from Early Adopters: Learn from the conversion experiences of Europe and Canada. What best practices were utilized? Which transition activities worked well and which didn’t work well? What transition areas were the most difficult? What areas require subject matter experts? Learning the answers to questions like these from the experiences of those who have successfully completed the transition to IFRS can yield great benefits for your transition effort

Network with Peers in your Industry and with IFRS Skills: Developing a network of peers will provide a community of ideas, successful strategies, unique skill sets, and resources from which to draw during your transition. Industry peers could play a key role in assisting each other in addressing transition topics specific to your industry.

Determine If and When to Outsource: Many companies will need to outsource. There are a number of skill sets required for a significant transition like the transition from US GAAP to IFRS. A few of the skill sets needed may include IFRS expertise, project management, change management, policy and process development, technology transition, tax expertise, legal document negotiation and the like. If your company does not have employees with these skills or cannot develop them in time to begin the transition process, outsourcing is a good way to acquire these skills. Outsourcing can also provide additional people resources when needed.

Begin to include IFRS in your Decision Making Process: As your company makes decisions, begin to include how those decisions would affect a transition to IFRS. For example, if a major acquisition or system implementation were planned, how would it affect the IFRS transition? What would the resulting financial statements look in IFRS? Including the IFRS impact on longer-term decisions is especially important.

Don’t do Too Much Too Early: If your transition date is December 31, 2016, you would be wise to avoid doing too much too early. For example, you wouldn’t want to spend significant time and money educating your staff on IFRS when you won’t be using those skills for a few years. The key is to make the right preparations at the right time so learnings are fresh and can be utilized to their fullest degree.

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