If you’re behind on your reading and need to catch up on why International Financial Reporting Standards are such a big deal, the Center for Audit Quality has a solution.
The CAQ published a quick, 10-page summary of what IFRS is all about and why they have become a topic of regular discussion in U.S. capital markets. Titled the “Guide to International Financial Reporting Standards,” it explains how IFRS evolved, how they have been accepted or adopted in nearly every major economy in the United States, and why the United States is thinking of adopting them too. It is targeted to investors, policymakers and anyone else with a stake in capital markets, said Cindy Fornelli, executive director of the CAQ.
The summary explains the upside for investors of a switch to IFRS, such as more efficient allocation of capital and greater alignment of the Unites States with other countries, for example. It also addresses some of the significant challenges of moving the United States to IFRS, such as consistent application across countries, the education and resources necessary to make such a monumental shift in capital market requirements, and the need to shift legal and regulatory gears to operate under an entirely new rule book.
Fornelli said the CAQ published the guide to help investors and policymakers in particular get more informed about the undercurrents around IFRS. “We know they have a lot of questions about what all of this means, but there’s not a lot of objective information out there,” she said.
While the guide doesn’t advocate whether the U.S. should adopt or reject IFRS, the CAQ has told the Securities and Exchange Commission that the United States should get on board with a single set of globally accepted accounting standards. The SEC has published a roadmap, or a prospective method and timeline, for adopting IFRS but it hasn’t acted any further.
The CAQ and numerous others have pleaded with the SEC to at least set a date so capital markets can more definitively prepare for the change. “There needs to be a date certain,” said Fornelli.