Financial Reporting Standards

How much will IFRS early adoption cost you?

Jim Kim — Tue, 18 Nov 2008 19:18:17 -0500

One of the big issues with the transition to International Financial Reporting Standards (IFRS) is how costly the learning curve will be. The issue is urgent all over again. The SEC released a time schedule for public comment that calls for IFRS by 2014. Early adoption by 110 large companies would be allowed as early as 2010. The SEC also released estimates suggesting that companies will likely spend between 0.125 percent and 0.13 percent of revenue on the transition in the first year of filing. After that costs should decline, as much as 75 percent in the second year. Many thought the SEC would act a bit more aggressively. Many auditing firms, according to CFO.com, were hoping for a more explicit mandate, in part to get companies moving on this important issue. You have to wonder whether the big changes will be fully supported by the new administration.

For more:
- here's the article

Worries about IFRS audit burdens mount

Jim Kim — Thu, 30 Oct 2008 08:36:53 -0400

Given the ongoing financial crises, concerns about the transition to International Financial Reporting Standards have taken a back seat, but not completely. There is mounting concern about the principles behind the new standard and what it means for the audit process, this at a time when a lot of companies have just hit a steady state regarding Sarbanes-Oxley and audits.

The general concern seems to be that the lack of hard-and-fast rules will lead to a much heavier disclosure burden--not to mention auditor bill. The classic example, given by Financial Week, is leases. Some are treated as a cost, some are treated more as an investment. Under GAAP, there is a specific test, but under IFRS, the issue is determined by intent. This could get tricky and make more than a few auditors antsy. Multiply this against all the other issues, and we're looking at an onerous process.

For more:
- here's the article

A delay in IFRS timetable release

Jim Kim — Thu, 02 Oct 2008 12:59:54 -0400

Just two weeks ago, international financial reporting standards (IFRS) was a big deal. Companies were anxiously awaiting word of a concrete timetable, one that the SEC had promised. But then came the pyrotechnics on Wall Street, and the promised release of the timetable never happened. No one is quite sure when it is coming. However, CFO.com suggests that the issue isn't the credit crunch, which would be easy to assume. The real issue may be that opposition has cropped up as of late. The article notes that Public Company Accounting Oversight Board member Charles Niemeier has spoken out against IFRS. Investor advocates are also making their views known. The timetable, and thus the actual implementation, likely will be delayed even more as the election--and all the turnover that entails--looms large.

For more:
- here's the CFO.com article

The impact of IFRS on your IT systems

Jim Kim — Sat, 27 Sep 2008 08:40:01 -0400

Everyone should accept International Financial Reporting Standards, warts and all, as a reality. Adoption is fait accompli. It's only a matter of time. KPMG's timely report on the information systems impact of IFRS is thus a timely read. The technology costs of conversion are likely to be significant, the reports finds. It also notes that a shortage of IT professionals with "the ability to interpret and translate the IFRS requirements into IT changes and solve the technical issues involved in the conversion" will be a problem for many. It is time to gear up. Costs will likely rise across the board, from system modifications, support, additional resources, training and so on. Auditors will need to be factored in. In addition, Sarbanes-Oxley controls cannot be blindly assumed to still apply. Some may need some tweaking. Tax reporting systems will have to be thought through.

For more:
- here's an article in accountingweb.com

These are busy times, don't forget XBRL

Jim Kim — Thu, 03 Jul 2008 09:31:32 -0400

For the moment, International Financial Reporting Standards (IFRS) is at the top of everyone's worry list. But a Compliance Week survey reminds us that the SEC has published a proposal to mandate XBRL for all companies by 2011. Fortune 500 companies would be required to adopt as early as next spring. This major reporting technology and IFRS would be quite a one-two blow: new numbers and a new way of reporting them. You would be wise to get your head out of the sand on XBRL. Unfortunately, the Compliance Week survey found 80 percent of company respondents said "nobody on their staff is well-versed" in XBRL. And 59 percent said "they either have just begun reading up on the technology, or have done no research at all." This could easily bite you. Time for a reality check. Here are the survey results.