IFRS in the US
While the near-term use of IFRS in the US by domestic public companies will not be required, IFRS remains very relevant to many US businesses. Companies are and will be affected by IFRS at varying times and degrees of magnitude, driven by factors such as size, industry, geography, M&A activity, and global expansion. Despite an unclear SEC adoption timeline, we believe the impact of accounting changes resulting from the FASB's and IASB's joint efforts will be significant and will have broad based implications.
Key developments for IFRS
- Many of the world’s capital markets now require IFRS, or some form thereof, for financial statements of public-interest entities. The remaining major capital markets without an IFRS mandate are (i) the U.S., with no current plans to change; (ii) Japan, where voluntary adoption is allowed, but no mandatory transition date has been established; (iii) India, where it is expected that regulatory authorities will mandate adoption in the next few years; and (iv) China, which intends to fully converge at some undefined future date.
- The discussion about the use of IFRS in the U.S. continues. In a speech in May 2014, SEC Chair Mary Jo White stated that considering whether to incorporate IFRS into the U.S. financial reporting system continues to be a priority and she “hopes to able to say more in the relatively near future.” At the AICPA National Conference on Current SEC and PCAOB Developments in December 2014, Chief Accountant, Jim Schnurr discussed a possible alternative to allow U.S. companies to voluntarily provide IFRS financial information as a supplement to its U.S. GAAP financial statements.
- In the meantime, the FASB and the IASB continue to work together on some aspects of the remaining convergence project on leasing. We believe that the "era" of convergence is nearing an end as the boards shift attention to their individual agendas.
Why it's important
- Although a mandatory change to IFRS for U.S. public companies will not occur in the foreseeable future, IFRS is increasingly relevant to many U.S. companies, big and small, public and non-public, because of: (i) cross-border, M&A activity; (ii) the reporting needs of non-U.S. stakeholders; and (iii) the IFRS reporting requirements of non-U.S. subsidiaries. Being financially “bilingual” in the U.S. is increasingly important.
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