The shift to International Financial Reporting Standards (IFRS) is both appropriate and, in any event, ineluctable. It is appropriate because our markets today, more than ever before, are truly global. Investors worldwide need to be able to compare companies across the board, and disparities in accounting conventions will only create major traps for the unwary. It is ineluctable because the SEC has wisely recognized the need for a uniform global standard and has paved the way toward the achievement of such a standard.
Before we actually arrive at this promised land, however, major questions will need to be answered about the roles that the Securities and Exchange Commission, the Financial Accounting Standards Board, and, ultimately, the U.S. judiciary, will play during the transition period, and once all public companies are required to report under an IFRS regime. Given the ineptitude and generally high level of dissatisfaction with FASB, the weakened political position of the SEC and the incentive to move quickly in the waning days of the Bush administration, steps along the road to adoption of IFRS may occur more quickly than otherwise might be expected. Companies should begin to prepare for the process of abandoning U.S. GAAP and adopting IFRS within the next several years, even while bearing in mind that many details remain to be ironed out.
