Presentation on theme: "Jana Raedy University of North Carolina"— Presentation transcript:
1Jana Raedy University of North Carolina IFRS in the classroomJana RaedyUniversity of North Carolina
2History of IFRSInitial 14 members are appointed to the IASBThe IASB begins promulgating standards as IFRS from IAS. The SIC becomes the IFRIC-2002.The European Union endorses IFRS for 2005 adoptionNorwalk Agreement is executed between the IASB and FASBSEC published a roadmap (Roadmap) for elimination of a US GAAP reconciliation for FPIsThe FASB and IASB published a Memorandum of Understanding, to set forth priorities in their joint work program1970s1980s1990s2000sSEC eliminated the US GAAP reconciliation for FPIsSEC (under Chairman Cox) published a proposed Roadmap for the mandatory adoption of IFRS in the USFASB and IASB reaffirmed their commitment to the MOUSEC established a Work Plan for its 2011 IFRS adoption decisionIASC Advisory Council formed to provide oversight of IASCStandards Interpretations Committee (SIC) is formedIASC is restructured to form a new board: the IASB – 1999.The IASC is formed – 1973.Courtesy of Ernst &Young Foundation
3Global Use of IFRS Courtesy of Ernst &Young Foundation IFRS required or permittedNo action taken/date set for adoptionLocal GAAP based on legacy IASIn process of adopting or converting to IFRSCourtesy of Ernst &Young Foundation
4Outlook for the use of IFRS in the US Timing Currently FASB and IASB are working on many convergence projects that are to be completed inConsolidation, Fair value measurement, Financial instruments, Financial statement presentation (presentation of OCI), Leases, Revenue recognitionSEC expected to come to some decision in 2011Based upon recent statements – my guess is not until the latter part of the yearSEC will allow a minimum of four years to adjust if it mandates the use of IFRS. This would mean the use of IFRS in 2015 at the earliest.
5Outlook for the use of IFRS in the US Possible Methods Adoption: US would practice under IFRS as issued with no modifications.Convergence: US would practice under US GAAP with efforts to converge differences with IFRS standards over time.Endorsement: US would review each IFRS standard as issued and determines whether the standard should be endorsed for practice with or without modification.Condorsement (SEC currently discussing):US GAAP would continue to exist.The IASB and FASB would finish the major convergence projects in the MOU.The FASB would work on the following simultaneously:No new major projects but rather set priorities of converging US GAAP (remaining topics not on the current agenda) to IFRS. This would be to make sure that these existing IFRS standards are suitable for US capital markets.Consider new standards issued by the IASB for endorsement (but not required) or incorporation (required) into US GAAP. This would ideally be issuing the standards in the codification without modification. This would also assume the US involvement in IFRS standard setting.This approach would allow the US to maintain control of US standards.
6How different are IFRS and US GAAP? Big, big picture:Not very different. Principles are virtually identical.Conceptual Framework is one convergence project.Big picture, by topic (typical intermediate coverage):Some differences, but not insurmountable for the classroom.Detailed level (what might be encountered in practice):Lots of differences.
7Is it important for students to learn IFRS? YES! And we should be teaching it now.Foreign subs located in the US are on IFRS.US multinationals have foreign subs on IFRS.Foreign private issuers trading in the US are only required to file IFRS reports.Much more likely now that students will do global rotationsCompetitive advantage for studentsCPA Exam now covers IFRS (effective January 2011)Recruiting firms are interested in students having IFRS knowledge
8Let’s view it as an opportunity To assess current curriculumSome topics no longer that important (extraordinary items)Some are infrequent in practice (non-monetary exchanges of assets, involuntary conversion of assets, sum-of-the-years-digits depreciation)Some are industry specific (depletion)Some aren’t allowed under typical circumstances (revenue recognition - installment and cost recovery methods)Others need to be added (revenue recognition – multiple deliverable, tax provisions, revaluations)
9Let’s view it as an opportunity To build other skills our students needJudgment/Decision Making SkillsUS GAAP relies extensively on judgment - IFRS even more soCritical Thinking Skillsability to read and interpret authoritative accounting literatureability to think about business problemsability to understand the reasons behind standards
10How should we put it in our curriculum? Fully integrated or as a stand-alone course?Full integrationStand AloneUS GAAP knowledgeDon’t spend time relearning US GAAPProvides a good review of US GAAP (use pre-class homework)Confusing?Requires students to sort out 2 sets of standards while they are still trying to learnCan get US GAAP under their belts before attempting a “2nd language”.Faculty involvementInvolves more facultyMinimizes number of faculty involved
11How do we make room? Students don’t remember them anyway. LESS RULES!Students don’t remember them anyway.We can’t even teach all of US GAAP rules now.MORE emphasis on:Teaching students to find the authoritative literature and interpret the standards for themselves.If we do this, then we don’t need to teach then every little rule.Creating a classroom/curriculum that provides opportunities for students to enhance their critical thinking, decision-making and judgment skills.Research CasesBasis for ConclusionsDebate Cases
12Integration into Intro course My suggestions:Intro to IFRS (similar to what I’ve provided today)Discussion of principles vs. rulesDiscussion of the need for judgment and critical thinking skills.Needed for US GAAP, even more so for IFRSVery basic coverage of differences between US GAAP and IFRS. For example:Inventory – LIFO not allowed under IFRSLTOA – can be revalued under IFRSHybrid securities – bifurcated under IFRS
13Resources Coming soon! Gordon, Raedy and Sannella, Intermediate AccountingFully integrated textbookFocus on judgment and critical thinking skills without sacrificing necessary rules
14Standard setters and regulators International Accounting Standards Board (IASB)Securities and Exchange Commission (SEC)globalaccountingstandards.shtmlFinancial Accounting Standards Board (FASB)
15Organizations International Association of Accounting Education and Research (IAAER)American Institute of Certified Public Accountants (AICPA)American Accounting Association (AAA) –look to International Accounting Section
16Access to eIFRSpart of Membership*Individual ,Student orInstitution