Throughout the world, regulatory agencies and investors have sought out a consistent worldwide standard for financial reporting, resulting in the U.S. Securities and Exchange Commission (SEC) publishing a proposed roadmap for large corporations to switch to international accounting standards by 2014. Under this proposed plan, more than 100 companies may be able to start following IFRS with their 2009 financial statements.
"Now is the time for companies to begin determining the steps they will need to take to ensure that their conversion to IFRS is as seamless and cost-effective as possible," said Christopher Wright, managing director with Protiviti and one of the firm's global leaders of IFRS services. "Conducting a diagnostic review of everything from financial policies and disclosures to data flows is strongly recommended now to scope out all the possible ways a company and its finance function could be impacted."
Key findings from Protiviti's IFRS survey include:
- 48 percent of the respondents reported their organizations have made no preparations to date to adopt IFRS
- More than 40 percent said that if the SEC allows a choice between using U.S. GAAP and IFRS, their organizations would choose to switch to IFRS
- Most companies don't have a Project Management Office (PMO) presently assigned to lead the transition
- More than 60 percent of respondents said they anticipate at least a moderate cost impact in transitioning to IFRS.
Survey respondents included CFOs, who made up almost half of survey participants, along with CEOs, chief audit executives (CAEs), vice presidents, controllers, and directors of finance and financial reporting. These participants also were asked to cite the greatest barrier to the transition to IFRS:
- CFO responses included cost, educating financial statement readers, learning new standards and setting up initial reporting formats.
- CAEs saw introducing cultural change and implementing information technology change management processes as barriers. This group also noted the need to understand the differences between U.S. GAAP and IFRS and to educate the company on those differences.
- Internal audit managers believed coordination with international operating units and updates to financial systems would be difficult in the transition period.
"If approved by the SEC, the IFRS transition could have far-reaching ramifications for U.S. companies including policy development, technology migration, operational processes and procedures, staff education and training and other change management efforts," Wright said. "Companies who plan for the possible IFRS convergence or conversion will have a competitive advantage over those that wait."
