Rumblings Over International Financial Reporting Standards
By Tommy Offill, MBA, CPA – Adjunct Faculty
We are on the cusp of seeing a uniform way in which financial statements will be prepared as a result of the growing global economy. Accounting students and professionals working in the field are likely already familiar with IFRS (International Financial Reporting Standards), a set of accounting standards developed by the International Accounting Standards Board (IASB) that is quickly becoming a global standard for the preparation of company financial statements. It is being implemented to help streamline the way in which revenues and expenses are reported. Not surprisingly, this comes with strong opinions on both sides of the change debate.
An Argument For
Those who support the global implementation of IFRS feel that it will help ensure consistent reporting across all companies and in all countries in terms of when revenues should be earned, when expenses should be incurred, and the valuation of assets and liabilities. Having this consistency will help investors when comparing companies side by side and will provide them with data to determine who is performing well and who is not. Trying to compare companies in today’s global environment is like comparing apples to oranges.
An Argument Against
Those that are opposed to IFRS believe there will be a lengthy learning curve, and too much room for varying interpretations by companies. Implementing new training programs for companies as well as in the academic world will be a costly endeavor. We live in a world today where some companies are trying to find a way to make businesses look as financially appealing as possible. They could blame their overstated revenues, understated expenses, and inflated assets values on misinterpretation of IFRS, thus they wouldn’t be penalized for their inaccuracies. Auditors, as well as the instructors in the academic world, will be challenged with channeling students and companies into a different way of financial reporting.
Whatever position you have in terms of IFRS, the change is imminent and it’s up to us, as accountants, and educators to provide as much support and guidance as possible. A global economy is on the horizon and an agreed upon approach to financial reporting is of the highest importance.
Where do you stand on IFRS? Are the challenges associated worth the effort?
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Tommy Offill, MBA, CPA, is an adjunct professor of accounting at Colorado Technical University. He earned his MBA from Texas A&M University – Commerce and brings over 17 years of professional experience in the accounting field. Connect with Tommy Offill on LinkedIn.