GAAP to IFRS, Getting Prepared
It seems that within five years the International Accounting Standards Board (IASB) will be taking place of the Financial Accounting Standards Board (FASB). What will happen to the companies who do not follow suit? They will fall behind. The big question is how this will affect the US. Where does the change need to begin? Maybe it starts in the schools. There are many pros and cons to the changes, and they all must be considered. One thing is for sure, everything else in the world is becoming global, why not accounting.
"U.S. accounting students will have careers where global transactions and interactions are common, so they will need to be familiar with IFRS and sensitive to the rapidly changing accounting environment." Changes are starting to be made at the college and university level. Students are being taught the differences in International Financial Reporting Standards (IFRS) versus the U.S.'s Generally Accepted Accounting Principles (GAAP). Emphasis, in the academic text books however, is still heavy on GAAP. Teachers are recognizing the need for IFRS in the curriculum, but it is hard finding room for it. The statistics show that a very large percentage of professors feel the need to for incorporation and believe that U.S. GAAP should continue to be taught, as well as, making sure to teach IFRS concepts with a compare-and-contrast approach.
This compare-and-contrast approach is very similar to what students will encounter on the CPA exams. The AICPA, American Institute of CPAs, says they plan on incorporating IFRS in the exam as early as 2011. CPA exam review courses are armed and ready to help prepare graduates to know how to tackle those questions on the exam with great success. Is it fair to ask to graduates to be prepared to answer questions on IFRS when teachers can't find time to fit the information into the classroom? Are they being thought of by professors and professionals, probably; but by the people making the test, who knows?
There is a lot of pressure on students right now in terms of the CPA exam. No longer can you take the test with the 120 credits it takes to earn Bachelors in Accounting degree. It now takes 150 credits, more than the standard bachelor degree credits; but less than the standard for a master's degree. Many schools have planned out initiatives to help students accomplish the 150 credits. Some are doing it so that they graduate with a bachelors and the 150; and some are doing it so that you can get a masters degree in practically a summer. Should these extra credit hours be devoted to the change to IFRS, I would think so.
There are so many things to take in consideration when trying to prepare students for the switch. Clearly GAAP standards are not going away completely or quickly. Text books will need to start discussing the changes. However, with the size of text books in the Accounting major we hit the same issue of timing. It is hard enough to teach every current standard in the classroom. Maybe this is why many people say that you learn more in practice than in the classroom.
One other thought that can be explored, is if businesses should push the learning of the IFRS standards for employees. With the new changes rapidly approaching and much uncertainty on what exactly they will be; many teaching approaches are popping up. There are quite a few companies out in there who are devoting there time to creating seminars on the changes coming with IFRS. Companies can pay for these seminars to come to their business or to send employees out. Documents are being printed to help make the transition smoother.
There are still issues of whether or not we will be going to away from GAAP completely or just adopting and adapting to IFRS. Universities and colleges will need to stay abreast of the debate so that they may address the changes and help the students learn them. CPA review course companies will need to be knowledgeable as well. Accounting firms and businesses of all sizes will need to keep their employees informed of the changes and be prepared to start changing their accounting practices when deemed necessary. If the Securities and Exchange Commission (SEC) wants to see a change within the next five years, companies will have to start changing their accounting practices in the next two years to be fully compliable and up to current standards at the five year mark. One thing for sure is that this transition from U.S. GAAP to IFRS is not going to be smooth.
Larson, R. K. . (2009). Incorporating IFRS into the accounting curriculum. The Economy Publications, Retrieved from http://findarticles.com/p/articles/mi_hb6421/is_8_90/ai_n31636805
WEBCPA STAFF, (2009, September 22). Accounting professors urge ifrs education. Retrieved from http://www.accountingtoday.com/news/Accounting-Professors-Urge-IFRS-Education-51825-1.html
Gonzalez , Adrienne s. (2010). Most aren't ready for ifrs on the cpa exam . CPA Exam, The JDA, Retrieved from http://goingconcern.com/2010/02/most-arent-ready-for-ifrs-on-the-cpa-exam/# doi: Going Concern
Questions and Answers
We repetitively hear from professors and future employers that IFRS is eventually coming to the United States. It's important to know of resources for the future transition from GAAP to IFRS in the United States which are found through most firms that travel internationally. Students should be well aware of the transition and become well versed with IFRS standards instead of having knowledge in solely GAAP for when they graduate into a possible IFRS world.
I will be discussing the differences between GAAP and IFRS. In addition, I will elaborate on how the transition from GAAP to IFRS will be a major change for businesses in some countries. Lastly, I will explain who this affects and how by giving examples about different groups of people who may be affected, such as students, teachers, accountants, and businesspeople as a whole.
How should the American accounting student respond to the impending changes to GAAP?
This article contrasts and examines the conversion of GAAP into IFRS. It also takes a look the advantages and disadvantages of switching over to IFRS.
A major aspect of the accounting world is the set standards that must be followed. As of now, there are two rule-based systems that are widely referred to in the accounting practice. They are Generally Accepted Accounting Principles (GAAP) and International Financial Reporting Standards (IFRS). Although both are utilized internationally, some argue that IFRS is the superior rule system of the two. Planning is now in process to converge GAAP and IFRS into one.
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