IFRS not OCBOA

Back in May of 2008, the Governing Council of the AICPA voted to designate the International Accounting Standards Board (IASB) in London as an accounting body for purposes of establishing international financial accounting and reporting principles. What this means is that AICPA members have the option to use International Financial Reporting Standards (IFRS) as an alternative to U.S. generally accepted accounting principles.

Under Rule 202, a member who performs professional services shall comply with the standards promulgated by the designated bodies. Additionally, a member may not say that financial statements are in accordance with generally accepted accounting principles unless they follow the standards promulgated by a standard setter listed in Appendix A of Rule 203.

The list of designated accounting bodies includes the Financial Accounting Standards Board (FASB), the Governmental Standards Accounting Board (GASB), the Federal Accounting Standards Advisory Board (FASAB), and the IASB.

There have been questions as to whether IFRS and IFRS for Small and Medium Entities (IFRS for SMEs) fall under “other comprehensive basis of accounting” or OCBOA. The answer is that they do not. IFRS and IFRS for SMEs are GAAP.

More information on financial statements prepared on a comprehensive basis of accounting other than GAAP is found in AU Section 623 Special Reports. It includes income tax basis, cash basis, and modified cash basis among others.

CPAs may need to check with their state boards of accountancy to determine the status of reporting on financial statements prepared in accordance with IFRS or IFRS for SMEs within their individual state.

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IFRS Are Coming

I recently attended the NASBA CPE Expo 2009. Held in San Antonio, Texas this conference had some outstanding programs given by some of the most knowledgeable speakers in the CPE world. Several of these speakers emphasized that IFRS are coming.

As you are aware, the FASB and the IASB have been working on a joint project designed to converge US GAAP, and international accounting standards. The SEC now permits issurers to file with the SEC using IFRS. The AICPA Council has voted to update Rule 203 of the Code of Professional Conduct to recognize the IASB as an international accounting standards setter, so private companies and not-for-profit organizations have an option to decide if following IFRS makes sense in their situations.

Another indication that IFRS is coming is a call from the AICPA Examination Team for volunteers to develop or review questions on IFRS for the CPA exam.

A perusal of IFRS will show you that in some ways, these standards are not all that different from US GAAP. Of course there are some differences. For instance, there is no such thing as LIFO in IFRS. And while US GAAP has a great many standards (now codified in one section of the FASB Codification™) on revenue recognition, IFRS has only two.

If you are not familiar with the FASB and IASB convergence project or IFRS, there's a couple of websites that will help bring you up to speed on this important subject. The AICPA has www.ifrs.com containing various courses on IFRS as well as news clips on the subject. The International Accounting Standards Board (IASB) website is www.iasb.org. On their website you'll be able to access IFRS.


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