Ten Points About : the New Global Accounting Standards
By TONY GABINETTI, CPA
1. The International Accounting Standards Board (IASB) was created in 2001 to develop an international set of accounting standards known as the International Financial Reporting Standards (IFRS).
|2. In May 2008, the American Institute of CPAs Council approved the International Financial Reporting Standards (IFRS) as a recognized standard-setter for financial reporting. More than 100 other countries have adopted IFRS as the global standard.|
|3. In July 2009, the IASB issued IFRS designed for use by small and medium-sized entities (SMEs). IFRS for SMEs are not intended to be used by not-for-profit organizations or governmental agencies.|
|4. Small and medium-sized entities (SMEs) in the scope of the standard include entities that publish general-purpose financial statements for external users and do not have public accountability.|
5. One projected timeline estimates that IFRS could be mandatory in the U.S. with a staggered adoption period of 2015-18.
|6. Once fully adopted, International Financial Reporting Standards will replace U.S. Generally Accepted Accounting Principals (GAAP) as the basis for financial reporting.|
|7. U.S. GAAP, IFRS, and IFRS for SMEs are similar, with basic accounting concepts such as comparability, going concern, and materiality.|
|8. U.S. GAAP, IFRS, and IFRS for SMEs are different, with certain accounting and reporting treatments. A few of these differences are the treatment of LIFO inventory costing, goodwill carrying value, impairments and write-downs, research and development costs, and borrowing costs for self-constructed assets.|
|9. IFRS reporting is considered simpler and more ‘principles-based’ than the ‘rules-based’ GAAP financial reporting, which may better meet the needs of financial-statement users. The change in reporting may have implications on an entity’s accounting, taxes, financing, as well as processes and controls.|
10. While full convergence from GAAP to IFRS reporting standards is years away, companies should speak with their accounting advisors to determine their requirements for adopting the new standards.
Tony Gabinetti, CPA is a senior audit manager at Meyers Brothers Kalicka, P.C. in Holyoke; (413) 536-8510.