Overview of IFRS
The American Institute of Certified Public Accountants (AICPA) proposed an online course that helps to understand the basic principles associated with the IFRS. The first segment of the course is the introduction to the key principles behind the IFRS that are discussed by the experts in the field of business and accounting. The discussion of the key points was moderated by John Hudson, the founder of Hudson Consulting Group, LLC. The experts were Bob Laux, Senior Director of Technical Accounting and Reporting at Microsoft Corporation, Danita Ostling, Partner in Ernst & Young’s Professional Practice Department, and Arleen Thomas, Senior Vice President of Member Competency and Development at the AICPA.We will write a custom International Financial Reporting Standards specifically for you
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The first point to discuss was the reasons for focusing on international standards in the sphere of financial reporting. Responding to Hudson’s question, Laux noted that the modern economy is a global economy, and today, companies play at different levels, while operating in both New York and London. As a result, the focus on international standards is the necessity for operating successfully in international markets. Furthermore, according to Ostling, the main reason for discussing the IFRS is associated with investment opportunities and alternatives for businesses. Having a variety of alternatives, investors need to compare financial information in order to make effective investment decisions.
Therefore, the provided financial information should be comparable and follow certain standards. Thomas added to this discussion that technology is the trigger for the observed processes because changes in technologies led to limiting or overcoming barriers in international economies and markets. Thus, the operation within the markets is the “global game” for companies today.
The experts focused on companies operating within the international markets as the major players in this game, and the U.S. companies also need the support associated with reporting the financial information in order to operate successfully all over the globe. According to Ostling, if the U.S. company develops as the international one, it is crucial to pay attention not only to the U.S. standards for the financial reporting but also to those standards adopted for London, or international standards.
Thomas also added that in this case, referring to international standards, private companies receive more opportunities to operate globally. Laux also added more details to the discussion of this point while stating that private companies need enough information about international standards because they are often the parts or subsidiaries of larger international companies that operate in global markets. While discussing the process of reporting the financial operations, these subsidiaries need to refer to standards used by the parent company. In this case, the focus on the international standards adopted for companies globally can be more beneficial.
Finally, Laux mentioned that the discussion of the IFRS should be considered as a business exercise rather than a simple accounting exercise because adoption of international standards is a part of a strategy for the company operating globally. Thus, there are many business benefits for companies that are associated with focusing on the use of international standards.
Saudi-Pak Accountancy & IFRS
Asher Noor and Taha Ali Khan co-moderated the 2nd Saudi-Pak Accountancy Seminar that was organized in Riyadh in March of 2013. The topics discussed during the panel session included challenges and opportunities of the convergence associated with the adoption of the IFRS in Saudi Arabia and globally. During the introduction, it was noted that international standards are important to resolve the financial reporting issues faced by many multinational organizations in the region. Focusing on the idea of convergence, the participants of the discussion determined the basic challenges and benefits of the adoption of IFRS depending on their experience in the spheres of financing, accounting, and investment.Get your
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The speakers focused on the necessity of adopting clear set standards that are known and understandable for investors to influence the process of making decisions. There is a lack of high-quality comprehensive standards in the region, and much attention should be paid to the adoption of the clearest ones, where the number of restrictions is limited for companies.
The other important aspect is training for financial professionals because the process associated with the convergence is rather complex. According to the speakers, it is necessary to concentrate on preparing the skilled staff for accepting the improved standards because today, specialists in the sphere often have not enough skills, and they need additional training.
One more significant point is consistency related to the application of set international standards in companies. Speakers pointed at the complexity of the whole process of transitioning to the new system of standards and noted that complex business impacts are associated with the process. In this context, it is important to apply right and effective changes in organizations, thus, to develop the process of transition consistently.
It was also mentioned that the companies in the region, including companies in Saudi Arabia and Pakistan, have no effective strategies or vehicles to adopt all the necessary changes associated with the convergence process. Therefore, the process of adopting international standards is based on the issue of globalization, and this adoption should be perceived as a complex project rather than an exercise in the sphere of accounting.
The obvious benefits that are associated with the application of new standards in the financial sector of the region are the possibility to control the process of financial reporting because of the set standards and to control the information put in income statements. As a result, financial documentation and reporting become improved as a result of adopting appropriate standards.
During the interaction with the audience, the experts in the field of financing also stated that the gradual approach of adopting the changes in the sphere is more beneficial for the companies in the region than the “Big Bang” approach. In addition, it is necessary to speak about convergence, and all variants of standards need to be changed. Furthermore, although the process of standards adoption can be discussed as painful for the companies, it is necessary for businesses in the region because of its significant benefits for the development of international operations.
IFRS in the United States
On April 24, 2012, Sir David Tweedie, the former chairman of the International Accounting Standards Board (IASB), Robert Herz, the former chairman of the U.S. Financial Accounting Standards Board (FASB), and Paul Cherry, the former chairman of the Canadian Accounting Standards Board (AcSB) participated in the panel discussion “Shaping the Future”. The main topic for the discussion was the progress of countries in adopting the IFRSs, with the focus on the U.S. and Canada’s achievements in this sphere.We will write a custom
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In his speech, Tweedie noted that the United States needs time to adopt the IFRS, and it is a real adoption of standards in contrast to the used term of “convergence”. It is important to state for businesses, companies, and authorities what to replace and what to adopt in this process of convergence, but the real focus is on adopting the IFRS for the United States.
The public is waiting for the results of the process of adoption because it is rather long, and the U.S. public companies need to know what to do with their reporting procedures in the situation when they need to stop preparing for the adoption of standards or continue the process. Tweedie accentuated that the U.S. companies hesitate regarding the use of new standards, referring to old ones, or combining the standards together as a result of convergence because the final decision is still not made.
Summarising the progress in the process, Herz noted that the progress is rather remarkable, but there is still much work to do because of the variety of differences in standards used in the United States and internationally. The IFRS differs significantly from those ones used in the United States in many aspects, and it was a challenge for persons responsible for adoption. The problem is similar for other countries, including Japan and China, because they are waiting for the decision made by the United States regarding the adoption of the IFRS or changes in them.
However, in spite of addressing many variations, progress in the process is observed, and it is important to focus on the principles of high-quality reporting for companies in the United States. Moreover, it is a task of the United States to determine the path in the adoption of these quality standards.
According to Cherry, the process of convergence in Canada is also associated with a lot of challenges. It is not easy to adopt the IFRS for the Canadian companies, and much time is necessary in order to make all the required transitions in relation to used standards. Thus, the opposition to the process of convergence among authorities and businesses can exist and influence the overall progress. Nevertheless, Cherry pointed at the support for the process because the costs of the process were significantly lower than predicted ones, and no real opposition was observed in spite of the expectations of the transition developers. Cherry pointed at the aspect of time in addition to the other factors required for the effective completion of all the necessary transitions.