By Randy Fletchall, CPA, Chairman, AICPA Board of Directors | CPA Letter | February 1, 2008
We are in the midst of great change in our financial reporting system. Yes, there are some real challenges, but this is also a time of significant and exciting opportunities for CPAs, both preparers of financial statements and those who audit them. The ongoing move toward greater convergence of financial reporting standards should improve the efficiency and effectiveness of financial reporting in a global economy, fostering expansion by businesses, large and small, and investment opportunities, particularly in emerging markets.
As the capital markets become more global, the convergence of U.S. GAAP and International Financial Reporting Standards (IFRS) is a virtual prerequisite to reducing the complexity and increasing the understandability of financial information used for cross-border investment and financing purposes. As a result, the AICPA is committed to convergence, and to continuing its longstanding role as a leader in international accounting standards and as an advocate for the convergence efforts of the International Accounting Standards Board (IASB) and the U.S. Financial Accounting Standards Board (FASB).
The recent pace of developments regarding the use of IFRS has been rapid. In November 2007, the Securities and Exchange Commission said it was revising its rules to accept from foreign private issuers financial statements prepared in accordance with IFRS as published by the IASB without reconciliation to U.S. GAAP. Of even greater importance was the Commission’s concept release seeking input on allowing U.S. public companies to prepare financial statements in accordance with IFRS. The Commission has been evaluating the input received from the comment letter process and two roundtables held in December 2007. A natural byproduct of these deliberations regarding an option is dialogue concerning whether U.S. companies should be required to report using IFRS at some future date.
The AICPA supports the ultimate goal of a single set of high-quality, comprehensive accounting standards to be used by public companies in preparing transparent and comparable financial reports throughout the world. Giving U.S. public companies the option to prepare financial statements in accordance with IFRS is an important step toward achieving that goal.
Achieving that goal also requires many other significant actions, both internationally and in the U.S. The challenges involve not just financial reporting standards but also the entirety of the financial reporting systems in place in the U.S. and around the world. The AICPA supports the convergence of auditing standards, capital markets regulation and audit oversight, believing that these also will contribute to a less complex and more cost-effective financial reporting process. The AICPA will call for action by others to address these major issues. For example, changes are required in the U.S. regulatory and legal environment regarding the respect for good-faith professional judgment applied by preparers and auditors if the use of IFRS is to be successful.
The AICPA plans to take a number of steps itself to make convergence a success:
- Educating our members about IFRS and providing them tools to assist in educating others in their companies, firms or clients.
- Working with accounting educators, textbook authors and educational institutions to prepare future professionals.
- Planning for the incorporation of IFRS into the Uniform CPA Examination.
We are mindful that at some point a dialogue regarding the possible use of IFRS by non-public entities in the U.S. will be necessary, but believe that discussion should not be commingled with the current one and more appropriately should occur in the future.
The stage is set for even greater progress toward these goals this year. We will continue to propel these initiatives and help our members prepare for them. Together we have the opportunity to make significant, enduring change.