IFRS: What's the Time Frame Now?

After being followed at a measured pace for most of the past decade, the schedule for implementing International Financial Reporting Standards (IFRS) within the U.S. has accelerated over the past year or two. Two bellwether events: Last year, the U.S. Securities and Exchange Commission (SEC) allowed some foreign issuers that file financial reports with the SEC to use IFRS without reconciling to U.S. Generally Accepted Accounting Principles (GAAP), as had been required. Then, in August 2008, commissioners voted to publish a "road map" outlining the move to IFRS for publicly traded companies within the U.S.

However, with the economy in a tailspin and both regulators and CFOs focused on survival and recovery, it's likely that the time frame may be extended. The presidential election probably will slow the pace as well, as a new administration may mean a change in staff at the SEC, notes Len Griehs, a member of the Financial Accounting Standards Advisory Council (FASAC), a group that advises the Financial Accounting Standards Board (FASB) on its agenda. Griehs also is vice president of investor relations with Campbell Soup Company. "The next SEC chair will do more study and evaluation," he says.

Even so, the move to IFRS and away from the 25,000 pages of rules, interpretation, and guidance that make up U.S. GAAP appears inevitable. "It's fair to say that it's no longer, Is this going to happen?, but now, When is it going to happen?," says D.J. Gannon, partner and leader of the IFRS solution center with Deloitte.

Lenovo, formed by the merger of Legend Holdings of China and the personal computing division of IBM in the U.S., espouses a concept that management calls "worldsourcing." The company draws on ideas and resources from its operations in more than 60 countries, without regard for location. So, when it came time to choose an accounting system, IFRS made the most sense, says Dennis Culin, director of business transformation. "Because of the globalized nature of business today, we believe that we need a standard that makes information transparent and makes it easy to compare your company to the next."

As Culin points out, the reasons for moving to IFRS remain solid, even as the world's economies lurch from one crisis to another. For starters, investors' increasingly global portfolios have boosted the benefits of using one worldwide standard for financial reporting. Cross-border capital flows hit $8.2 trillion 2006, having grown 14.2 percent annually between 1990 and 2006, according to a January 2008 McKinsey study, "Mapping Global Capital Markets: Fourth Annual Report."