CPA Success

SEC decision on IFRS delayed. Education shouldn't be.

My attitude on IFRS in the United States is starting to drift into "I'll believe when I see it" territory.

In early 2010, the SEC said it would vote before the end of 2011 on how to incorporate IFRS into the U.S. financial reporting system, if at all. A year and a half later, with the end of 2011 approaching and no SEC decision on IFRS in sight, SEC Commissioner Kathleen Casey urged the SEC to incorporate IFRS, adding that the SEC “can no longer kick the can down the road.”

Then came the AICPA's National Conference on Current SEC and PCAOB Developments in early December, where SEC Chief Accountant James Kroeker told attendees that the Commission would need "a few additional months" to complete its IFRS deliberations. This Reuters article seems to imply that the delay could be even longer than that.

In response, Financial Accounting Standards Board Chair Leslie Seidman offered her own vision of a "modified incorporation" of IFRS into the U.S. financial reporting system. According to Accountancy Age, it looks like this: "Under her vision, the FASB would gather input and research, while refraining from working on standards being tackled by the (International Accounting Standards Board)."

It all seems like semantics though, doesn't it? As Peter Margaritis says, the U.S. is already dealing with IFRS. It's hard not to, considering that about 120 countries already permit or require the use of IFRS for listed companies.

"IFRS is already here through the back door, and it's not going to go away, even if the SEC says, 'We're not going to do this,'" says Margaritis, an instructor with the Business Learning Institute and president of IFRS Education and Training, LLC. "You've got Canada, Mexico -- all the major economies throughout the world are using IFRS. We will run into it somewhere down the line -- and that's if the United States doesn't adopt it. I believe we will."

If that's the case, we'll need to bone up on our IFRS -- and sooner rather than later. Here are some crash courses in all things IFRS:

• Dec. 15: International versus U.S. Accounting: What in the World is the Difference?


• Jan. 9-10: Major IFRS and U.S. GAAP Differences: This two-day course provides a comprehensive comparison and review of critical technical differences between US GAAP and IFRS. Use promocode MACPA10 to recieve a discount.


• Webcast: The Impact of IFRS and Other Global Standards on Private Entities: Jan. 10 | March 6 | May 23


• Feb. 28-March 2: IFRS Fundamentals: This four-day course provides a rigorous and detailed overview of all major technical IFRS requirements, and includes illustrative financial statements, case studies, examples, coverage of the most significant IFRSs, and interactive participation from the delegates. Use promocode MACPA10 to recieve a discount.


• April 23: Understanding IFRS: A Hands On, How To Approach

Customized training also available
The MACPA’s Business Learning Institute can also customize your on-site IFRS training for you. Visit www.BizLearning.net and click on “Search the Customized Training Catalog” for a full list of available options.

AICPA: IFRS should be optional. World: It's not.

The Great IFRS Debate just won't die, will it?

Not that we really expected it to. This issue is so hot, it's temperature is to be continued.

A couple of recent pieces in the news, though, have turned the heat up a bit.

First came the AICPA, which told the SEC recently that, despite whatever direction the Commission eventually settles on, U.S. companies should be given the option of adopting IFRS.

"An adoption option would provide a level of consistency in the treatment of U.S. companies and foreign private issuers that report under IFRS that does not exist today, and would facilitate the comparison of U.S. companies that elect IFRS with their non-U.S. competitors that use IFRS," AICPA Chair Paul Stahlin and CEO Barry Melancon write in a letter to the SEC. "Furthermore, giving U.S. companies an option to adopt IFRS as issued by the IASB would be another important step towards achieving the goal of incorporating IFRS into the U.S. financial reporting system."

Sounds reasonable. Even if the SEC decides IFRS is not the way to go, U.S. companies should be given the option of adopting it.

When it comes to the United States and IFRS, though, "optional" is not the word the international community is looking for.

Robert Hodgkinson, executive director of the Institute of Chartered Accountants in England and Wales, says the "dream of uniform worldwide standards" could be jeopardized if the United States refuses to adopt IFRS.

"Asian nations are 'sitting on the fence' towards adoption," Hodgkinson argues in this GFS News article, "meaning that the Securities and Exchange Commission's decision on whether to adopt the standards has become 'critical' to achieving a single model for worlwide accounting."

In other words, according to Hodgkinson, if the U.S. doesn't sign up, other key nations like Japan and India might not, either.

Of course, it's not like the U.S. won't have to deal with IFRS anyway. Let's revisit the words of Peter Margaritis, an instructor with the Business Learning Institute and president of IFRS Education and Training, LLC:

"IFRS is already here through the back door, and it's not going to go away, even if the SEC says, 'We're not going to do this.' You've got Canada, Mexico -- all the major economies throughout the world are using IFRS. We will run into it somewhere down the line -- and that's if the United States doesn't adopt it. I believe we will."

The bottom line: We might as well cozy up to the IFRS notion. It's going to be here for a while.

Learn more here
You'll get a complete debriefing about the state of IFRS with these courses:

• Oct. 18: The Impact of IFRS and Other Global Standards on Private Entities
• Nov. 2: IFRS Update and Review of Complex Topics
• Dec. 15: International versus U.S. Accounting: What in the World is the Difference?
• From Peter Margaritas and the BLI: IFRS vs. GAAP: The Differences That You Need to Know
• From Peter Margaritas and the BLI: IFRS From 5,000 Feet

Is IFRS worth the effort in the U.S.?

What's going on with IFRS these days?

It depends on who you ask and what you read. Consider:

• SEC Commissioner Kathleen Casey says the costs of ignoring IFRS are too great and that U.S. regulators must embrace IFRS for U.S. issuers. The SEC, says Casey, “can no longer kick the can down the road.”
• A senior FASB advisor says the application of international standards around the world has been wildly inconsistent, and that raises serious questions for U.S. officials.
• Incoming IASB Chair Hans Hoogervorst is renewing the international call for the U.S. to get on board. Writes Accountancy Age: "(Hoogervorst) called on the U.S. Securities and Exchange Commission to take steps toward adoption, saying that U.S. companies 'would welcome some certainty in the near future' and noting that other major economies are looking to the U.S. for direction."
• The FASB and the IASB have delayed issuing a revised plan to overhaul revenue recognition rules -- one of the major convergence projects on the table.
• At the same time, most U.S. CPAs have at least some knowledge of IFRS and are learning as much as they can as quickly as they can in advance of full U.S. implementation.

In the United States, the march toward IFRS has been two steps forward, one step back. Every green light is followed by a speed bump or two.

But Peter Margaritis has a message for CPAs: It doesn't matter if the U.S. has implemented international standards. IFRS is already here, and it's time to deal with it.

"I have a client in Tuscon, Ariz., who was purchased by a Mexican company," said Margaritis, an instructor with the Business Learning Institute and president of IFRS Education and Training, LLC. "Mexico is going (to IFRS) in 2012, and (the Mexican company) told my client, 'You need to be on IFRS by 2012 -- not when the SEC tells you, but now.'

"IFRS is already here through the back door, and it's not going to go away, even if the SEC says, 'We're not going to do this,'" he adds. "You've got Canada, Mexico, Japan -- all the major economies throughout the world are using IFRS. We will run into it somewhere down the line -- and that's if the United States doesn't adopt it. I believe we will."

I spoke with Margaritis at length about the state of IFRS in the United States during the MACPA's 2011 Maryland CPA Summit. Listen to our discussion in its entirety:

Learn more here
You'll get a complete debriefing about the state of IFRS with these courses:

• July 18: IFRS and XBRL
• Oct. 18: The Impact of IFRS and Other Global Standards on Private Entities
• Nov. 2: IFRS Update and Review of Complex Topics
• Dec. 15: International versus U.S. Accounting: What in the World is the Difference?
• From Peter Margaritis and the BLI: IFRS vs. GAAP: The Differences That You Need to Know
• From Peter Margaritis and the BLI: IFRS From 5,000 Feet

The convergence train keeps rolling ...

International financial reporting standards have come under renewed fire overseas, but the concept of convergence seems to be chugging along.

Efforts to converge existing international reporting standards with U.S. GAAP -- to improve them and eliminate their differences -- took another step forward when the Financial Accounting Standards Board and its international counterpart, the IASB, issued new guidance on how the use of fair-value accounting should be measured and disclosed.

Here's what AccountingWeb says about the move:

"The requirements do not extend the use of fair value accounting, but provide guidance on how it should be applied where its use is already required or permitted by other standards within IFRS or U.S. GAAP, FASB and the IASB emphasized.

"For U.S. GAAP, the update will supersede most of the guidance in Topic 820, although many of the changes are clarifications of existing guidance or wording changes to align with IFRS 13. The update also reflects FASB’s consideration of the different characteristics of public and non-public entities and the needs of users of their financial statements. Non-public entities will be exempt from a number of the new disclosure requirements."

It's an interesting development, considering that less than a week earlier the boards had announced that the target date for completing the remaining convergence projects would be pushed back from June 2011 to the end of 2011.

It's hard to get a good read on all of this. Some companies overseas appear to be souring on IFRS and convergence timelines are getting pushed back stateside, but international regulators keep moving toward their convergence goals. One step up, two steps back, a little do-si-do, and the IFRS dance continues.

I can't help but believe that in an increasingly global environment, reporting standards will become increasingly global as well. But what the heck to I know?

I want to hear from you -- particularly you folks who have had some hands-on experience with IFRS. What do you think? What's the best path to take at this point?

Want to learn more?
Don't miss the 2011 Maryland CPA Summit on June 3 at the BWI Hilton. Pete Margaritis, CPA, will offer an update on all that's happening on the IFRS front, and there'll be plenty more learning opportunities as well. Get complete details and register here.

AICPA adds three tools to change-management belt

The folks at the AICPA have been busy beavers lately. Here's proof:

• They've teamed up with the London-based Chartered Institute of Management Accountants to propose a global management accounting designation. "Those holding the new designation would commit to an ongoing, self-directed program of developing and maintaining competency in management accounting as well as leadership and strategy," the Institute explains.
• They've launched an IFRS certificate program that will "provide a measurable standard for evaluating competence in understanding and applying international accounting standards." The program consists of 25 online, on-demand self-study training courses.
• They've created the Workplace Leader in Financial Education Award, "the first national honor for employers who provide financial education programs that improve the personal well-being of their employees." All employers — corporate, not-for-profit and government — with offices in the United States are eligible for the award. Those interested can apply through July 1 at www.wlife.org. Winners will be announced in October.

Sounds as though the AICPA — like the rest of us — is trying to surf those waves of change. Hang ten, everyone!

No global opinion about IFRS

Everyone's still talking about IFRS, but they're not speaking the same language.

Look at what's hit the wires in just the past few days alone:

• Sir David Tweedie, soon-to-be-former chair of the International Accounting Standards Board, has extended his "America Must Conform" tour with yet another very public call for the United States to start toeing the IFRS line. "We all know there cannot be a global system without U.S. acceptance of IFRS," Tweedie told the U.S. Chamber of Commerce, adding that "(d)elaying the adoption of IFRS imposes unnecessary costs and risks on U.S. companies."
• Former PricewaterhouseCoopers Partner Peter Wyman believes IFRS might be a flawed concept. Consider this excerpt from a recent Accountancy Age artice: "Wyman said many leading accountants -- including himself -- 'were not wrong' to push IFRS, but admits ... new research is 'compelling in demonstrating that significant further work is necessary before IFRS can be said to be totally fit for purpose.'"
  
  The article paraphrases Wyman as saying that IFRS is "too academic, complicated and unintuitive."
• According to a recent Duke University / CFO Magazine survey, CFOs understand the importance of IFRS and feel a sense of urgency about the issue, but most of them work for companies that have not yet begun to address the IFRS question.
  
  "Asked which are the most crucial accounting issues their companies are facing in 2011, 34 percent of the 472 CFOs who responded to the question ranked 'convergence to IFRS,' or international financial reporting standards, as number one. Cumulatively, the respondents ranked IFRS convergence higher than any other accounting issue. Yet asked to describe their companies' 'readiness to comply with global accounting standards,' 44.2 percent said they hadn't 'begun to address convergence,' while 38.8 percent said they were preparing but were 'far from ready.'"

Make no mistake: IFRS is coming to America. The debates over when, how, and whether we are prepared continue unabated. It's going to be fun to follow.

Check out these related MACPA / BLI offerings:

• March 25, Columbia: Understanding IFRS: A Hands On, How To Approach
• IFRS Essentials with GAAP Comparison: Building a Solid Foundation
• IFRS for Small- and Medium-Sized Entities
• IFRS Update and Review of Complex Topics
• IFRS vs. GAAP: The Differences You Need to Know
• International Financial Reporting Standards
• IFRS From 5,000 Feet
• IFRS: An Overview of the Looming Change to Global Standards
• International versus U.S. Accounting: What in the World is the Difference?

What's keeping CPAs up at night?

The tsunami of taxes, regulations and standards changes coming at them, their businesses and clients!

They also do not feel the recession is over and are worried about the state of the fragile economy.

That is the feedback from more than 1,000 CPAs as I wind down the fall series of our town hall / profesisonal issues updates (worth four hours of free CPE for MACPA members) and several keynotes across the country. You can see my presentation on SlideShare.net by clicking here.

What is amazing to me is this: As if the changes are not enough, there are already changes to the changes to report -- thus the purpose of this post.

The top 5 federal tax  and regulatory issues are as follows:

1. The FTC red flags rule goes into effect on Dec. 31, 2010 ($3,500 penalty).
2. Tax preparer regulation and the new IRS PTIN requirements.
3. 1099 reporting pequirements.
4. Small Business Jobs and Credit Act of 2010 (and 1099 provision for rental property).
5. Expiration of the Bush tax cuts ... or not?

Here is the latest updates on these (good news / bad news):

FTC Red Flags: The U.S. Senate has voted to exempt CPAs in CPA firms with the passage of S 3987 Red Flag Program Clarification Act on the evening of Nov. 30. Small businesses and non-profits will still have to comply by Dec. 31. Here are resources to help small businesses comply and the sample written policy (ITPP) sample written policy.

1099s from the health care act: Efforts to repeal this (including our own Sen. Cardin) failed in the Senate for the second time this year. (See our post on CPA Success.) We will have to try again next year before it takes effect in 2012.

Bush tax cuts expire on Dec. 31, 2010. This is still being discussed. I find it interesting that the word "millionaire" now means $250,000 and up. Must be some sort of new math?

And the top 6 accounting standards issues all involve convergence. As I like to say, there may be 50 ways to leave your lover but only six ways to converge global accounting standards with the U.S.!

1. SEC -- mandated switch to IFRS for public companies (decision in 2011)
2. FASB-IASB convergence workplan (from the 2002 Norwalk agreement)
3. FAF Blue Ribbon Committee on Private Company Standards
4. Auditing Standards Board "clarity project" with IAASB
5. Professional ethics -- PEEC -- IFAC convergence of ethics
6. Global sustainability standards -- IIRC (see my post at FEI)

FASB-IASB convergence update: Just received from FASB, this special edition for private companies covers the latest fast-moving developments in upcoming standards. It starts with this: "Three Far-Reaching Exposure Drafts -- A Call for INPUT." This is just the first round, so stay tuned and pay attention.

You'll find more great coverage on all of the FASB developments by Edith Orenstein over at the FEI Reporting Blog.

So what are we doing about all of this?

• The MACPA has been advocating on your behalf and working with the AICPA (which has done a remarkable job) for the past year on all of these issues (red flags, PTIN, 1099s, etc).
• The MACPA is forming two special task forces to deal with these rapidly changing issues -- one for federal taxes and regulations and another for accounting standards.
• And we have not even covered the state issues! Make sure our voice is heard by attending CPA Day in Annapolis on Jan. 19. Register here (and get two more hours of free CPE).
• Let us know if you want to be involved or have suggestions for us to help you deal with the tsunami.

We finish up our town hall meetings with a quote from Jon Kabat-Zinn: "You can't stop the waves, but you can learn how to surf."

Hang ten, fellow CPAs. We are with you!

IFRS: Hurry up or wait?

There's been a lot of chatter about IFRS out there recently, and it all seems to boil down to two themes: (a) It's coming, and (b) we're not ready.

Take a recent AICPA survey, for example. In it, CPAs recognize that the IFRS movement is gaining momentum, but they're still "waiting to invest more resources in international standards until they see a clear signal from the Securities and Exchange Commission about future U.S. adoption."

That might be the reason why the AICPA is urging the SEC to go slow on IFRS adoption.

“Our research indicates that companies will need five years preparation time to adopt IFRS if the SEC requires two years of historical comparative financial statements," the AICPA stated in a comment letter to the SEC. "If only one year of comparative financial statements is required, a four-year transition period would be needed to adopt IFRS.”

So the overriding opinion seems to be this: Let's take a reasoned approach to bringing IFRS to our shores.

There's just one problem: IFRS is already here. So says Peter Margaritis, anyway.

Margaritis, chair of the Ohio Society of CPAs' Executive Board and president of IFRS Education and Training, LLC, says IFRS has snuck into the United States "through the back door" thanks to foreign entities that either (a) obtain control of U.S. entities, (b) exhibit significant influence over U.S. entities, or (c) simply begin operating within U.S. borders. Many times, those foreign entities are already preparing their financial statements in accordance with IFRS, and they bring it with them to the States.

"The SEC is proposing the earliest possible implementation of IFRS would begin in 2015 or later. However, the number of current sightings of IFRS in the U.S. is growing and will only increase as we approach mandatory implementation," Margaritis writes in "Waiting for IFRS? It’s already here," an article originally published by the OSCPA. "... The time to prepare is now. Firms and businesses that are proactive will have financial leverage and advantage over their competitors."

So what's the answer? Gear up for IFRS now, or wait for word from on high?

Let us know what you think, then check out these related resources.

• Debunking IFRS myths (from CFO.com)
• MACPA professional issues updates: Get the latest on IFRS, plus 4 hours of free CPE
• Dec. 7 program: International versus U.S. Accounting: What in the World is the Difference?
• Dec. 14 program: The Impact of IFRS and Other Global Standards on Private Entities
• March 25 program: Understanding IFRS: A Hands-On, How-To Approach

For CPAs, massive changes at head-spinning speed

There's been a lot of talk about the massive changes bearing down on the profession these days. Lost in all that buzz, though, is the unbelievable speed at which these changes are happening. Consider:

• A panel tasked with determining the future of U.S. accounting standards for private companies will present its latest recommendations during its next meeting on Oct. 8.
• The rules surrounding preparer tax identification numbers, or PTINs, go into effect almost immediately. Tax preparers impacted by the rule must optain their PTIN before they file any return after Dec. 31, 2010. You can now register to get your PTIN online ... if you don't get bogged down in technical difficulties, that is.
• Unless they are changed, the regulations surrounding Form 1099 reporting requirements for small businesses — which will force businesses to report to the IRS any purchase of $600 or more from a vendor of goods or services — will go into effect in 2012.
• Despite many stops and starts, the SEC's IFRS roadmap is still on track for a 2011 implementation.

None of that takes into account any potential regulations that are enacted on a state level by Maryland's General Assembly in early 2011 ... and given the state's fiscal predictament, that's a distinct possibility.

So much has changed so quickly, we've almost completely forgetten about the groundbreaking Dodd-Frank Wall Street Reform and Consumer Protection Act, which was passed by Congress in July. Some of that law's most groundbreaking provisions take effect shortly, and CFO.com's Roy Harris takes a closer look:

Among the many hot-button issues to be considered between October and December: proposals for rules governing shareholder "say on pay" votes, and other compensation-related matters, including new listing standards for compensation-committee independence. Other closely watched discussions in the tentative timetable involve the SEC's first regulation of the over-the-counter derivatives market, and proposed rules for disclosing consultant conflicts. Enforcement topics include establishing a Whistleblower Office, proposing whistle-blower incentives and protection rules, and making a report to Congress on progress in the whistle-blowing program.

If the normal 30-day comment period applies to the Dodd-Frank reforms — signed into law by President Obama on July 21 — draft rules for say-on-pay and other compensation matters could be out by mid-November. The SEC says, however, that it doesn't plan to adopt final rules on compensation committees and consultants until at least next April.

For the most part, the SEC's timetable envisions study of the many proposed rules through December, with either reports to Congress or adoption of the proposed measures slated for the months thereafter, through July 2011.

Wow ... thanks for all of that extra time, SEC.

Want to find out more? Business Finance's Eric Krell takes a closer look at finance reform's winners and losers.

Bottom line: It's time to pay attention, folks.

Don't miss CPA Day in Annapolis
The first step is to circle Jan. 19 on your calendars. That's CPA Day in Annapolis, an annual event during which MACPA members meet with their legislators to discuss these and other issues of importance to the profession. It's free, you'll earn two hours of CPE, and you'll be doing your part to protect the profession. Get further details and register here.

Private company standards: Are we at a tipping point?

Malcolm Gladwell made the "tipping point" concept famous in his book by the same name a few years ago (a great read, by the way). He describes a tipping point as "the level(s) at which the momentum for change becomes unstoppable."

Ever since FIN 46R and FIN 48 came along (from which we were requesting relief from the Private Company Financial Reporting Committee), the voices of private company preparers and auditors have gotten louder and louder, expressing concerns that GAAP has become too complex and costly for private companies to keep up with.

That is why we applaud the efforts of the Financial Accounting Foundation, FASB, AICPA and NASBA for addressing this issue in the FAF Blue Ribbon Committee on Private Company Financial Reporting.

More than 74 percent of members attending our professional issues updates / town hall meetings support separate private company standards. We included their responses in our letter of comments sent on Sept. 15, which became response No. 129 on the FAF website in answer to the questions posed by the committee.

You can read our entire comment letter here.

Plenty of others commented, including FEI (read more on their blog here) and several state CPA societies and plenty of CPA firms, for a total of 140 comment letters.

What do you think? Are we reaching the tipping point? Is this an idea whose time has come?