The international marketplace has become cozier as globalization takes hold. But with this brave new world comes a standardized set of accounting practices called International Financial Reporting Standards, or “IFRS.” IFRS offers a single set of global accounting rules to promote transparent and comparable financial statement information. Over 100 countries already require or allow for IFRS reporting and it’s coming very soon to the U.S. and Canada. As a small or medium-sized company, you’re probably uncertain about if, when, or how you should adopt the new IFRS requirements so let’s take a closer look.
IFRS in a Nutshell
The new IFRS requirements were developed by the International Accounting Standards Board (IASB) to achieve convergence in accounting standards around the world. In a nutshell, IFRS is designed to ensure comparable financial statement preparation and disclosure regardless of the country that your business calls “home.” So no matter where you do business, you have an apples-to-apples method of evaluating company financial statements and improving transparency.
So who’s required to make the switch? Typically, IFRS is required for publicly accountable organizations—companies listed on public stock exchanges; however, they are not the only ones. Most experts think that GAAP (for U.S. companies) will eventually disappear, leaving IFRS as the only standard. So it’s not a matter of if, but when, to incorporate IFRS.
Think IFRS is Only for Big Business?
Think again. Whether compliance is by necessity or choice, there are a number of issues to consider. If your small or mid-sized business is planning to go public; provides services to or is contemplating a merger with IFRS-compliant companies; is operating globally or planning to…you need to think about making the change. As companies consider the cost-benefit of compliance, the IASB has published a stripped-down version of IFRS aimed at small business and mid-sized private companies… “IFRS Light” if you will. More detail about IFRS for small business can be found here.
A Few Details
For companies that are accustomed to accounting under the rules of GAAP or similar, IFRS will have an impact on how you account for inventories, assets, revenue recognition, convertible debt, deferred taxes, financial statement presentation, and much more. In the U.S., the SEC has proposed a tentative roadmap for companies to run GAAP and IFRS in parallel for the years 2012 and 2013, ultimately leading to mandatory IFRS filing beginning in 2014. In Canada, the timeline is even sooner. The Canadian Accounting Standards Board (AcSB) has confirmed that IFRS will replace Canadian GAAP effective January 1, 2011, for “publicly accountable, profit-oriented enterprises.”
IFRS and Sage Accpac
Part of the benefit of your support and maintenance plan is that you get the latest product updates and enhancements as the business environment changes. So whether you need to revalue foreign currency, change your method of inventory costing, update depreciation on fixed assets, or modify your method of reporting, you can rest assured that Sage Accpac will support your transition to IFRS.
For more detail, contact us to request a copy of “Meeting the Challenge: Planning for IFRS Conversion”