IFRS Transition: A Casualty of the Economic Crisis?

The old saw "the more things change, the more they stay the same" might apply to the shift to International Financial Reporting Standards (IFRS).

Before the bottom fell out of the economy, the SEC took a full-speed-ahead position on the transition away from GAAP by offering a road map that would lead to all public companies reporting under international accounting standards by 2014; 100 large multinationals were given the green light to start reporting in IFRS even earlier if they so choose, which proponents of the new standards say will result in competitive advantage.

Fast forward to a whole new world of problems in credit markets, job losses, and decreased consumer spending and it comes as no surprise that companies don't seem to be in a rush to take the SEC's accelerated path-- and regulators seem too busy grappling with other new challenges to keep up the momentum.

A new survey by Protiviti Inc., a consulting and audit firm, confirms that U.S. companies are dragging their feet. Forty-eight percent of respondents say their company has made no preparations to date about IFRS and most companies don't have a project management office assigned to lead a transition to IFRS.

CFOs cite the greatest barrier to IFRS as costs, educating financial statement readers, learning new standards, and setting up initial reporting formats. Chief audit executives view introducing cultural change and implementing information technology change management processes as barriers and internal audit managers believe coordination with international operating units and updates to financial systems would be difficult in the transition period.

But it seems that the potential competitive advantage of IFRS is on corporate radars. More than 40 percent of those surveyed said that if the SEC allows a choice between using GAAP and IFRS, their organizations would choose to switch to IFRS. So when regulators dig themselves out from under the current financial crisis, IFRS may once again be front and center in their minds and the minds of finance executives, too.