Expert Video feedback from Frederick Petrus:
It’s no secret that IFRS does not seem to be consistently applied from country to country. From what we understand, IFRS is frequently applied in a manner that is similar to a given country’s current or former national accounting standards.
The fact that the global approach to IFRS seems a bit spotty makes us want to wait for a more mature approach or vision. At the same time, we fear some upcoming transactions could be put in jeopardy (after the execution) if we don’t more fully understand what the IFRS impact may be. It’s already clear to us that the greatest costs behind IFRS are not the expense of acquiring IFRS knowledge.
PwC’s Dave Kaplan responds (view Kaplan’s Expert Video here):
To Frederick, I would observe that there are two kinds of diversity in financial reporting. First, diversity that makes similar economic transactions look different, and second, diversity that makes dissimilar transactions look the same. I would acknowledge that IFRS sometimes allows the first more than does U.S. GAAP. But U.S. GAAP more often, because of its prescriptive rules and very detailed guidance, makes dissimilar transactions look the same. Neither is good for investors and the capital markets. It will take time for IFRS to continue to improve, but the road map still calls for U.S. change 5 to 7 years out. Significant improvement will occur, as a matter of course, during that time period. The U.S. can be a lot more influential in the process of helping IFRS to mature if we are on the inside, if we have decided to move the U.S. to IFRS, than if we remain on the outside.
Also, I would observe that the standards themselves are only part of the solution. In addition, the regulatory environment is important and the U.S. regulatory environment is more robust than the environment in many other jurisdictions. Over time, regulatory systems will improve around the world and industries will coalesce around similar presentations, creating more consistency. Again, the SEC will have more influence if the U.S. has announced a willingness to move to IFRS.
I also agree with your point that making sure you fully understand the IFRS impact of transactions is very important and would encourage you to do so, as IFRS is already impacting the U.S. markets in many ways.
Expert Video feedback from Brenda Holsworth:
We’re trying to define what might be considered early milestones as we advance toward international standards. The idea, of course, is to monitor our progress. However, we’re at loss to know what those milestones should be. Any suggestions?
Brenda, transition to IFRS is a challenging process that does take time. Project management is very important, and it would be difficult to fairly summarize key milestones in an email, especially without knowing specific information about your enterprise. What I would say, however, is that determining the early milestones is a key part of approaching an IFRS conversion strategically. Each business is different, and a structured approach to this process makes a lot of sense. I would encourage you to reach out to an advisor who has done a number of IFRS conversions to discuss the process and approach in more detail. ###
