The U.S. transition toward international accounting rules may have hit a speed bump, but that isn’t slowing some major corporations in getting ready for the eventual monumental shift in financial reporting.

At Compliance Week 2009 this week, two accounting officers for multinational companies described their early studies into how a change from U.S. Generally Accepted Accounting Principles to International Financial Reporting Standards would impact their respective companies. At Eli Lilly, Chief Accounting Officer Arnold Hanish said the company identified about 15 experts in various parts of GAAP and assigned them to study how the company’s accounting and financial reporting would be affected by a shift to IFRS.

The six-to-eight month exercise led to a realization that adopting IFRS would not just change the company’s accounting and financial reporting. “We tried to identify where it would have a low, medium, or high impact on both the accounting and reporting standards, and also the business,” he said. “Adopting IFRS is a business issue, not just an accounting issue.”

Bob Laux, senior director of financial accounting and reporting at Microsoft, said the company took a “very deep dive” into what it identified as the top 10 accounting issues that would be affected by a switch to IFRS. “It quickly became much more than an accounting exercise,” he said. “We met every day, and I was surprised every day by something that I hadn’t thought about.”

A whole variety of tax issues came to the fore, said Laux, especially with respect to international business and transfer pricing. The company also identified it would have significant issues to address with respect to compensation plans, and especially stock options. Provisions around vesting and minimum tax withholdings differ in IFRS compared with GAAP, he said, which would require the company to make some potentially significant changes in stock option plans.

Hanish said Lilly discovered changes to pension accounting would be potentially dramatic as well. Entities are allowed on adopting IFRS to take a fresh start on accumulated actuarial gains or losses in a pension plan, he said. “Most of us have losses now after the turmoil we’ve seen,” he said. “We can make an election to wipe all that out and start over. That would have a huge impact on the bottom line.”

Lilly got its external auditors involved in the assessment to tap additional resources but also to get some early consensus on how the company would be allowed to report under various IFRS principles. “In the end it would save time, effort, and money to (consult with) auditors,” he said. “Regardless of what you do in the end you have to get the auditors comfortable with the conclusions you reach under the principles.”

The Securities and Exchange Commission has collected feedback on its proposed roadmap to adopt IFRS beginning in 2011, but has taken no further action. SEC Chair Mary Schapiro inherited the proposal from her predecessor, Christopher Cox, but so far hasn’t shown much enthusiasm for it. Still, the United States remains the only major economic force holding out on adopting IFRS.

Hanish said Lilly and many other corporate interests are lobbying the SEC to ease up on a planned requirement for companies to provide three years worth of financial statements prepared under both GAAP and IFRS. Hanish said it would be too difficult to look back and restate prior financials under IFRS and too onerous to run side-by-side reporting systems for three years into the future to meet the requirement.

He’s hopeful companies will be allowed to provide only one year of GAAP and IFRS results together, then rely on disclosures related to other key performance indicators to help investors understand financial results through the transition. Laux agreed the dual reporting requirement is a concern, but only one among many. “I get concerned about what business issues I haven’t thought of,” he said.