What is in this article?:
- When Should You Move to IFRS?
- Why the Cost of the Transition may be Limited
- Don’t Forget: IFRS for SMEs May Be an Option
- How to Start the Transition? Identify the Project Leader
- Consequences for Contractual Arrangements
- Where to Start? Prepare an Assessment of Meaningful Differences
- Impact of the Convergence Project? Real but Temporary
- The Output: A Set of IFRS Financial Statements
- Review of the Current Procedures
- Take Away
For the past few years the SEC has worked on its plan on whether or not to adopt International Financial Reporting Standards (IFRS) in the United States for domestic public registrants. So far no clear answer has been proposed and the deadline for it has been postponed to this year. Parallel to this SEC initiative, the FASB and the IASB are progressing on their Convergence Project with an expected completion date this year.
From a public companies standpoint these matters should be, and usually are, viewed as hot topics since the way they report their financial results may be completely changed depending upon the decision of the SEC. But for most of U.S. private companies the general perception is that these discussions around the adoption of IFRS have no real impact on their reporting.
The truth is they should have an impact at least with regards to reviewing the opportunity to switch to IFRS. Indeed, it should be realized that since May 2008 and following a decision of the AICPA, U.S. privately held companies are authorized to issue their financial statements in accordance with IFRS as issued by the IASB.
To date just a limited number of companies have decided to switch to IFRS, but 2012 may be remembered as the year when IFRS were adopted by U.S. private companies. Various factors will play in the decision, but the critical factor for us is the realization by management of these companies that the cost of this transition is probably limited and definitely not as expensive as it would be for a public company.