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Because “incorporation” through standard-setting is geared toward eliminating the differences between IFRS and U.S. GAAP, it could facilitate full recognition of IFRS’s benefits, while simultaneously addressing some of the concerns that have been raised regarding the implementation of IFRS. Beyond alleviating certain of the challenges associated with outright IFRS “adoption,” incorporation addresses issues such as FASB’s future and the U.S. maintaining control over the standard-setting process.

It is also possible that the Commission could permit voluntary adoption of IFRS by certain companies, such as large multinationals, before the incorporation process is complete, allowing them to benefit from IFRS sooner.

As the boards continue to work through their agendas, what’s important is the stability and transparency of the global standard-setting process, and how national standard-setters like the FASB may play a role in that process once IFRS is incorporated as a reporting requirement.

What’s Next and How to Plan for It

Like children on an extended car trip, many in the U.S. are
asking, “when will we get there,” as it relates to IFRS. This
year should bring some level of clarity as FASB and the IASB
complete their convergence agenda and the SEC determines
the next steps on IFRS.

While the SEC has not outlined a definitive timeframe for when IFRS might be incorporated into the U.S. financial reporting framework, it has indicated that it could be by 2015 or 2016. That may seem like a long way out, but because of the need to present comparative information and the large volume of changes coming to both U.S. GAAP and IFRS, most companies are already considering how to deal with the movement to IFRS and other U.S. GAAP changes resulting from convergence efforts.

Whether it’s a new “converged” U.S. GAAP standard or IFRS, it’s important to keep in mind that the impacts are not just about accounting. Considerations should include not only the readily apparent implications such as those related to accounting, internal control, staffing and expertise, and statutory and internal reporting, but also less apparent implications in areas such as technology, tax, contracts, debt covenants, and internal and external communications. Given the broad implications, personnel both inside and outside of finance and accounting will need education and training.