14 November 2012

ACCA: IFRS in the US - Adoption will happen in the long run

US investors expect that the country will eventually adopt IFRS, but that the process will take time and need substantial investment in staff and training, finds new research from ACCA published in a report called 'IFRS in the US: An investor's perspective'.

The most significant challenges identified by investors are the one-off transition matters, while longer-term concerns are rated less highly. 

• The most informed investors polled believe it will take US corporates some four-and-a-half years to be ready for IFRS. They ask that convergence plans aim for full convergence, allowing adequate time for investors and industry to adjust.
• Awareness of IFRS among US-based investors is modest - when asked, only 34 per cent of investors felt able to cite specific differences between US GAAP and IFRS.
• However, 38 per cent of investors said they were comfortable comparing statements prepared under IFRS with statements prepared under US GAAP.
• Investors saw marginal differences between IFRS and US GAAP, with 22 per cent of investors claiming that the quality of disclosures under IFRS is higher, against 25 per cent who favoured US GAAP. 
• Among investors with a solid understanding of IFRS however, the balance shifts to 40 per cent to 21 per cent in favour of IFRS.

Sue Almond, Technical Director at ACCA said: "While there are clearly challenges and reservations highlighted in the survey, attitudes to IFRS appear to be changing in the US, irrespective of any action by the SEC. The more familiar investors are with IFRS, the more confidence they have in the standards, which echoes the experience in countries that have already adopted IFRS."

Questions remain for the future, as looking ahead ACCA’s report also identified the issues that are most responsible for shaping US investors’ attitudes towards IFRS. By order of significance, these are:

• Will IFRS adoption lead to reduced complexity for US corporates? 
• Is IFRS adoption going to lead to a dangerous loss of US influence over the standard-setting process? 
• Are US corporates likely to see cost savings and synergies emerging as a result of IFRS adoption? 
• Will IFRS adoption make it easier to compare the performance of US corporates with that of other companies overseas? 
• Are US auditors likely to second-guess management more frequently as a result of IFRS adoption? 

Sue Almond concluded: "A better understanding of global standards produces greater assurance – and it will also prompt more investors to learn about the International Accounting Standards Board and the work they are doing on convergence. The accountancy profession – on the global stage as much as in the US – will have a significant role to play in educating the business community about global standards and needs to prepare for this."

Press release

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