Experts: Take Advantage of IFRS Training

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.S. capital markets are beginning to mobilize for a massive back-to-school exercise—accounting school, that is.

Preparers, finance staff, auditors, and even investors have a lot to learn about International Financial Reporting Standards if the United States is to adopt them over the next several years as widely anticipated. The Securities and Exchange Commission is expected to signal soon whether it will allow or perhaps even require U.S. companies to file financial statements using the upstart international rules, given their rapid adoption throughout the world.

Popken

That is both good and bad news for U.S. accounting folks who have grown up on U.S. Generally Accepted Accounting Principles, says Alfred Popken, a principal with Deloitte and U.S. leader of the firm’s global IFRS group. The good news: the U.S. financial reporting community probably knows more about IFRS than it realizes, he says. The bad news: “The switch to IFRS is a mindset shift. How do you switch mindsets? That’s going to be a big challenge here.”

RELATED RESOURCES Deloitte Offers Online IFRS Education (2008) E&Y Training: IFRS Continues to Evolve (2008) KPMG Institute Events: IFRS Tax Conference (2008) PricewaterhouseCoopers Resource Center for IFRS (2008) Leveraged Logic: The Convergence Seminar (Sept. 25, 2008) The SEC Institute’s IFRS Conference (Dec. 17, 2008) IA Seminars on IFRS, GAAP Convergence (2008) AICPA IFRS Resources, News, & Updates (2008) Financial Executives Institute IFRS Conference (Nov. 19, 2008) Related Coverage SEC Seats Filled, IFRS Edges Closer (Aug. 12, 2008) Clean Sheet or Topside Tweaking for IFRS? (Aug. 5, 2008) FASB to Untangle GAAP Twists (May 20, 2008) SEC Kills GAAP Reconciliation (Nov. 20, 2007) SEC to Vote on GAAP Reconciliation (Nov. 13, 2007) Are Investors Ready for IFRS & GAAP? (Nov. 6, 2007) Mixed Views on Ending IFRS Reconciliation (Oct. 2, 2007)

IFRS experts say some companies are already soaking up IFRS training to the extent it is available in the United States, pondering how to get their personnel ready to work from a brand new accounting rulebook. At some companies, “a certain panic factor has kicked in at this point,” says Bruce Pounder, president of Leveraged Logic, a financial consulting and educational services firm. “They now have this sense there’s a parade they might be missing if they don’t act quickly.”

Alpert

For others, however, the mood is quite the opposite. “Most companies haven’t done anything,” says Avi Alpert, research director for the Controllers’ Leadership Roundtable of the Corporate Executive Board.

Likewise, Terri McClements, a partner with PricewaterhouseCoopers and leader of the firm’s U.S. IFRS advisory services, says, many companies “are still in denial of what IFRS is and that it’s coming. We’re telling companies they should at least get a general awareness of what IFRS is.”

For companies that believe they need to know more about IFRS than they currently do, Popken says training efforts should focus on enabling companies to assess what IFRS will mean for them. That would take in more than just financial reporting, but also information systems, human resources, sales, and other areas where a change in accounting would affect operations. “They can use that information to plan their future around IFRS,” he says.

Pounder

Training should not dive deeply into the nitty-gritty differences between IFRS and GAAP, Pounder says, because the standards are still changing and will continue to evolve before the United States would make any switchover. (The earliest deadline anyone is talking about is 2013.)

“It’s not productive for most folks to try to learn the technical differences today, particularly for the rank-and-file accountant in Corporate America,” Pounder says. “At this stage, awareness should be the key objective.”

Companies should focus training on a few key people at the top, then cast a wider net as the move to IFRS picks up steam, says Danita Ostling, a partner at Ernst & Young and the firm’s Americas IFRS leader. “Training can be an iterative process,” she explains. “Look for big issues now, and map out how you’ll progress down that path of ultimately getting the financial statements converted. What do people need to know now? Who needs to know that now? Then as you go through the conversion process, train more people more broadly, more deeply as you go down the path.”

Ueltschy

Timing will be key to maximizing the training investment, according to Rich Ueltschy, a partner at the auditing firm Crowe Chizek. “If you train and don’t use it, you lose the value of that training pretty quickly, so you don’t want to train people three years in advance or your training dollars are wasted,” he says. “On the other hand, you don’t want to wait until you have months to report. You have to begin thinking about the training strategy.”

“Training can be an iterative process. Look for big issues now, and map out how you’ll progress down that path of ultimately getting the financial statements converted.” — Danita Ostling, Partner, Ernst & Young

Janice Patrisso, executive director of the KPMG IFRS Institute, says timing may somewhat depend on what approach to IFRS conversion a particular company decides to take. Some companies are planning to adopt IFRS by starting with a clean sheet of paper and writing all new accounting policies based on the system; others may examine how IFRS is different from what they’re doing now and work to minimize the differences. The different approaches to adoption will naturally demand different training approaches, she says.

Companies might also think in terms of the expected timeline to adoption … which will be trickier right now, since the SEC has not provided a timeline for an optional or mandatory move toward IFRS. If a company expects to report under IFRS five years into the future, Patrisso notes, then it needs to back up two or three years to provide comparative financial reports. That means beginning use of IFRS as quickly as two to three years from now.

Some companies want individualized training specific to their companies while others like participating in industry- or sector-specific forums, where several companies from a given sector receive training together, Patrisso says. “There are benefits to companies coming together and talking about how they’re thinking a particular standard under IFRS may be applied knowing there’s room for judgment,” she says. “Other companies say we don’t want to discuss that with our competitors.”

In addition to training people internally, companies must consider how they’ll teach their investors to understand financial reports provided in a new accounting language, Patrisso says. “It’s going to take three years or more for analysts and investors to be trained and educated in this topic.”

BACK TO SCHOOL A list of available training courses and IFRS resources follows. For more information on the companies below, please see the links in the above Related Resources box. Deloitte: IFRS e-learning offers free online financial reporting tools. Ernst & Young professionals speak on IFRS and its evolution. KPMG IFRS Institute for upcoming events, Webcasts on IFRS. PricewaterhouseCoopers IFRS resources, educational tools, IFRS developments. Leveraged Logic: The Convergence Seminar, September 25, 2008, Washington. The SEC Institute: IFRS Conference: Today’s Landscape … Tomorrow’s Challenge, December 17, 2008, New York. IASeminars offers IFRS courses in both the U.S. and the U.K. in 2008. AICPA offers an IFRS resources page with details on upcoming events and IFRS news, updates. Financial Executives International IFRS conference, November 19, 2008, New York.

Although IFRS expertise is still somewhat limited in the United States, training resources are beginning to appear quickly. The Big 4 accounting firms, and to some degree second-tier firms, offer extensive resources on IFRS: materials on corporate Websites, Webcasts, Seminars, and one-on-one client training.

Education firms like Pounder’s, the SEC Institute, IA Seminars, and others are gearing coursework toward IFRS awareness and mechanics. And professional associations such as the American Institute of Certified Public Accountants, the Institute of Management Accountants, and Financial Executives International are offering coursework of various kinds.

Universities are starting to offer IFRS coursework to college students, to ready the incoming workforce, according to Big 4 firms that are working with universities to help establish curricula. Knowledge will also come to the U.S. via relocating folks from overseas who are already using IFRS, Alpert says. Some organizations may also entice retirement-age accountants to remain in the workforce a little longer, he adds.

McClements

Ironically, older accountants may adapt to the more principled approach of IFRS better than younger accountants, Alpert says; older accountants who got their start in the 1970s or 1980s can remember when GAAP was still a judgment-based world, like IFRS is now. “In a lot of ways, we’re stripping back to a more natural accounting regime that we used to be under,” he says.

McClements says companies should be active in training their people to help shape the discussion around the move to IFRS. Given the judgments to be applied, a certain group thinking inevitably will begin to emerge. “We’re encouraging people to get involved in the dialogue so they can help shape the outcome,” she says.