Accountants across the United States are keenly watching the changes to our Generally Accepted Accounting Principles (GAAP). Over the last few years there has been a big push toward convergence with International Financial Reporting Standards (IFRS) with the SEC (Securities and Exchange Commission), FASB (Financial Accounting Standards Board) and the IASB (International Accounting Standards Board) leading the way. After a while it turns into Alphabet Soup with all the agencies but these issues will have a profound effect on the accounting industry.
To start, CPAs should familiarize with the IFRS Standards sooner rather than later as many of the standards will likely be universal. A couple key differences include: IFRS does not allow curing debt covenant violations after the end of the year, LIFO (Last In, First Out) is not allowed as an inventory costing method and they use a single-step method for impairment write downs. The bottom line is IFRS is much simpler than our current system under FASB.
In today’s economic climate, more companies are conducting business abroad and it is becoming increasingly important to universalize accounting standards. It makes it easier to compare financial records, avoids confusion and keeps everything consistent. For more information on convergence and IFRS standards, check out Paul Becht’s course 'International Financial Reporting Standards Update'.