Closing the GAAP
As Canadians adopt international accounting standards,
they should know the rules may change at the last minute.
Submitted by Karine Benzacar, MBA, CMA, CPA (Del.)
Managing Director of Knowledge Plus Corporation.
All these factors are slowly pushing the United States to adopt IFRS and experts say that Canada’s decision to adopt IFRS has been instrumental to encouraging the U.S. “Don’t underestimate the impact Canada has on the U.S.,” says Sir David Tweedie, head of the International Accounting Standards Board (IASB). “If anyone would have expected Canada to change standards, they would have expected Canada to adopt U.S. GAAP. Canada’s decision to adopt IFRS took the world by surprise.
The U.S. is looking around at all the big economies and the only one that hasn’t accepted IFRS is the U.S.” However, we can’t expect the U.S. to simply fall in line with the rest of the world. The FASB has been working closely with the IASB to “converge” U.S. GAAP with international standards. This does not mean simply making changes to the U.S. GAAP. As Bob Hertz, head of the FASB, explained to more than 800 accountants at a conference jointly sponsored by the Canadian Institute of Chartered Accounts (CICA) and IASB in Toronto in April, “Both of our standards [the U.S. and the IASB] are in some desperate need of overhaul. If the U.S. is going to adopt IFRS in the future, we have to make sure it makes sense for everyone rather than just adopt it.” In a joint presentation with Hertz, Tweedie acknowledged that “the IASB is making some adoptions of U.S. standards; the U.S. is making some adoptions of IFRS.”
The United States and the IASB are jointly reviewing several topics from the technical accounting for mergers and acquisitions to the way information is presented in financial statements. In fact, in a few years, we can expect financial statements to look substantially different from the way they do now, whether in North America or in Europe. Hertz’s comment summarizes the United States’ lack of acceptance of IFRS and the country’s philosophy of modifying it before adopting it. “This is all about change and some people do not often take to change that well for a variety of reasons. ... Whether it’s about the U.S. taking an IFRS standard and making it U.S. GAAP or together creating a new standard, it’s all about change.” In other words, we should expect the United States to use its power and influence to make changes to IFRS before it agrees to adopt it. We should also expect to see the IASB agree to these changes in order to obtain the buy-in from one of the world’s largest economies.
What does this mean for companies that are working hard to adopt the new accounting standards? IFRS is a moving target and until theUnited States buys into the standards, we cannot consider it finalized. Canadian companies should still begin their conversion efforts immediately, since there is a lot of work ahead, but they should also plan to make further changes and refinements down the road.
Submitted by KARINE BENZACAR
Previously published in The Financial Post
karine@knowledgeplus.ca or connect with Karine on LinkedIn
Karine Benzacar is managing director of Knowledge Plus Corp., a business consulting
and training firm. www.knowledgeplus.ca. Karine Benzacar’s works have been published in well known publications such as the Financial Post, the Bottom Line, and the CMA Management Magazine, and has written “ Accounting for new Financial Statements IFRS” featured in The IFRS Zeitgeist.
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