IFRS is coming to the US and many stakeholders are unprepared –
that is the verdict of several leading US-based IFRS experts.

While the rest of the world has either adopted or is preparing to
adopt the international standards, the largest economy is taking
cautious steps towards allowing listed companies the choice of
using IFRS.

IFRS debate, which permeates the corridors of the US Security and
Exchange Commission (SEC) in Washington, is finally spreading
throughout a profession that holds strong allegiances to US
GAAP.

Bruce Pounder, the president of consultancy Leveraged Logic,
admitted the SEC’s sudden announcement in 2007 to allow foreign
issuers to file under IFRS without reconciliation requirements and
its current consultation on whether US companies should be
permitted to use IFRS “caught a lot of folks by surprise”.

“Things have moved very quickly. I believe it is virtually certain
the SEC will allow US registrants the choice of using either US
GAAP or IFRS as published by the IASB,” he said, adding the
decision could be made as early as this year and be effective from
2009.

On the horizon

KPMG’s audit department of professional practice partner Paul
Munter believes an SEC decision is on the horizon. “What we are
hearing is the SEC is working on rule proposals that are likely to
be proposed in the next several weeks, but our understanding is
that it may permit a choice [of IFRS] at least initially to very
large multinational companies. It also will likely propose an
updated roadmap and action steps necessary to cascade IFRS
reporting out to a boarder number of [public] companies.”

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Pounder suggested adoption will be voluntary and interest the
largest companies to begin with: “Over a period of years, more and
more companies will find it beneficial to make that switch and they
will have gotten philosophically comfortable with the idea of
making the switch from US GAAP to IFRS.

“For a market as large as the US it will be titanic in scale.
Fortunately, with the concept of the option, I think we will see a
classic adoption curve where the good news is not everybody is
going to rush to switch at the same time and the most eager
companies to switch are going to be the ones with the most to gain
and the most resources to devote to the task.”

The professional service firms that serve large multinational
clients are invariably members of international networks and can
draw on the resources of international counterparts who already use
IFRS. KPMG US began training staff in IFRS in 2004. Munter
estimated that at present the US firm has more than 1,000 audit
partners and managers who have had training on IFRS.

Wait and see

Outside the Big Four, however, it is a different picture. Crowe
Chizek is one of the largest mid-tier firms in the US but most of
the firm’s clients are domestic entities. Assurance and financial
advisory services executive Hans-Peter Rudolf said he is a little
sceptical whether many clients would voluntarily switch to IFRS and
most clients will adopt a ‘wait and see’ approach.

Crowe recognises the need for IFRS capacity due to its strategy to
push more upmarket and is training staff. Rudolf said inadequate
IFRS training could provide a barrier for prospective clients.
Pounder too has witnessed a tripling in demand for his IFRS
consultancy work in the past six months.

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