Convergence from generally accepted accounting principles (GAAP) to some level of international financial reporting standards (IFRS) is inevitable. As your business makes this change, we at Wright Ford Young & Co. will walk beside you every step of the way, allowing you to focus on your core business. We’ll help you through this transition with minimal disruption by:
- Translating the complex new standards into a language you understand
- Modeling the impact on your business
- Meeting with your internal and external stakeholders (shareholders, lenders, etc.) to explain how your business will be impacted
- Assisting you in every aspect of the actual implementation
- Providing detailed training to your team, as necessary
Since the Financial Accounting Standards Board (FASB) and the International Accounting Standards Board (IASB) entered into their 2006 memorandum of understanding, we have kept a watchful eye on their imminent convergence. To minimize the upheaval caused by a total and complete convergence to IFRS, the FASB has been issuing, and will continue to issue through approximately 2012, new accounting pronouncements at an unprecedented pace .
The convergence to IFRS will have a significant impact on almost every U.S. business. Major changes on the horizon include:
Currently, U.S. GAAP features more than 100 different standards guiding revenue recognition rules. When the new standard is issued, there will most likely be one six-step process to determine if and when revenue is recognized.
Accounting for Leases
The bright-line tests in FASB No. 13 will be eliminated, as will operating leases. The FASB’s goal is to get all company commitments, such as signed leases, on the right side of the balance sheet as recorded liabilities.
In the wake of the Enron scandal, the FASB attempted to close certain loopholes via FIN No. 46, which requires the consolidation of certain variable interest entities. The new consolidation rules will focus on a new definition of “control,” which will most likely be defined as “the power to direct the activities of another entity in order to generate returns.”
Financial Statement Presentation
Suffice it to say, financial statements will get longer and disclose much more information. Comparative financial statements may be required. Statement of cash flows must be prepared using the direct method. There may also be disclosure required that analyzes the changes in significant assets and liabilities.
With so many changes ahead, you’ll want to trust your business to a client-friendly accounting firm with the experience to get the job done right. At Wright Ford Young & Co, our clients include subsidiaries of or parent companies with operations in Australia, France, Germany, the United Kingdom, Israel, India, China, Mexico, and Canada. For many years, our international clients have relied on us to accurately apply international financial reporting standards.