Survey: Finance Leaders Warming to IFRS

Despite the lack of a firm indication from the SEC of when, how, or even whether it will introduce a mandate for U.S. public companies to use international financial reporting standards (IFRS), an eventual transition to the global standards seems almost inevitable. In November of last year the Commission eliminated the requirement for foreign private issuers that use IFRS to reconcile to U.S. GAAP. In the same month, the SEC issued a concept release and sponsored a series of roundtables to explore the idea of allowing U.S. issuers to use the international standards.

By and large, finance leaders have been less than enthusiastic, but that may be changing, according to research from Deloitte. In a poll of senior finance professionals at some 200 U.S. companies, 30 percent of respondents said that they would consider adopting IFRS if they were given the opportunity to do so now. True, they were easily outnumbered by the 42 percent who said they would not consider switching to IFRS. But the results represent an uptick in interest in the global standards since October, when just 20 percent of participants in a comparable Deloitte survey said they would consider IFRS if given the choice by the SEC.

The increasingly international reach of U.S. companies is one factor in the growth of interest in IFRS, according to D.J. Gannon, partner with Deloitte & Touche LLP and leader of the firm's Centre of Excellence for the Americas. "More and more companies are understanding that, from a non-U.S. perspective, they have to deal with IFRS now -- and then there's the separate issue of what's going to happen here in the U.S. with the SEC requirements," he says.

When asked what they thought were the biggest obstacles to adoption of IFRS, 43 percent of respondents cited the cost and complexity of the conversion. Eighteen percent thought that investors and analysts don't view the international standards as favorably as they do U.S. GAAP, and 13 percent cited a lack of consistency in the application of IFRS globally.

Deloitte expects that by 2011 nearly every country, including the United States, will be using IFRS to some extent. It's not too early for U.S. organizations to start examining the implications, according to Gannon. "One of the things that companies are realizing is that this is not just an accounting exercise; there are a lot of other effects that follow on from the technical differences in accounting," he notes. Those may include, for example, changes to internal controls and IT systems. "What does it mean from a tax perspective? What does it mean for your treasury function? Legal obligations, debt covenants, how you communicate with investors -- all kinds of things have to be considered as you move away from U.S. GAAP."

Download the full Deloitte study, "2008 IFRS Survey: Where Are We Today?" here.