With IFRS (International Financial Reporting Standards) rapidly becoming a dominant language of financial reporting worldwide, due to the increased globalization of commerce, it is important that your company begins assessing the impact of IFRS now.  Even though IFRS, if made a mandatory requirement by the Securities & Exchange Commission (SEC) for U.S. issuers, would most likely not go into effect until 2014, starting to prepare now can save your company effort, time and money, and offer you a valuable opportunity to review, streamline and improve all aspects of your company's accounting, reporting and related compliance and information technology processes.

If IFRS doesn't kick in 'til 2014, why should you care about it now?
When companies are required to change to international accounting, all of their statements must be changed. This may require time-consuming changes to accounting systems and related processes. For example, for a 2014 filing containing three years of financial statements, the statements as early as 2011 must be revised to international standards for consistent reporting within that three year period. Much of the information to restate the 2011 statements will have to be created now (e.g. deferred tax components, impairment losses, contingency accounting, fixed asset depreciation, etc.). If companies wait until 2014 to attempt restatement, much of the historical information required to convert to international standards will be lost, forgotten, in the minds of accountants long retired, or simply not available. In order to avoid a massive reconstruction project, accounting departments should start planning for the changes now.  

Do I really need to start keeping two sets of books?
At the date of conversion, you'll need to present complete financial information, including historical cost. So, for certain accounts, start keeping two sets of books—one on U.S. standards and one on international standards. That way, when you make the full conversion to IFRS in five or six years, you'll have three years of historical financial data to immediately present on a restated basis; thereby avoiding financial panic.

Where will the major differences occur?
The major differences between IFRS and GAAP occur in the rules where U.S. accounting is most complex. Major changes will be in the following areas:

• Business combinations (some convergence will be achieved by SFAS 141(R))
• Impairment of long lived assets
• Lease accounting
• Income taxes
• Revenue recognition
• Share based payments
• Financial instruments
• Goodwill impairment
• Pensions

Getting started now on your IFRS preparation/conversion will further benefit companies and management by reducing the number of financial reporting frameworks to which they may have to comply, thereby strengthening the standardization of accounting policies across the organization.

Sheri Oliveras Lejman is a Stonefield Josephson Principal, CPA and business advisor. For more information about IFRS preparation/conversion, contact Sheri at 949-428-3452 or slejman@sjaccounting.com.

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