IFRS in the US: Adoption Will Happen in the Long Run, Investors Say
US investors expect that the country will eventually adopt International Financial Reporting Standards (IFRS), but that the process will take time and need substantial investment in staff and training, finds new research from ACCA (the Association of Chartered Certified Accountants) published yesterday in a report called, IFRS in the US: An investor's perspective.
The research was conducted for ACCA by Forbes Insights, surveying some 500 US-based investors.
Fifty-seven percent of investors expect that the SEC will one day require reporting under IFRS, with more investors agreeing than disagreeing that the long term benefits of adoption would outweigh the costs – 41% versus 29%.
Sue Almond, Technical Director at ACCA says, “More investors believe the eventual adoption of IFRS in the USA will result in a net benefit to the American economy than not. In ACCA's view, US adoption of IFRS would give a tremendous boost to the cause of globally comparable financial reporting, and more importantly, the US and world economies. ACCA has repeatedly called for putting investors at the heart of the standard-setting process globally, and this is why we commissioned this research, to understand what American investors thought about the future of IFRS in the USA.”
Hans Hoogervorst, Chairman of the IASB, said, “The ACCA's findings are consistent with anecdotal feedback we hear from the US investor community. They also lend further credence to the argument that the USA is well prepared for a successful transition to IFRS.”
The most significant challenges identified by investors are the one-off transition matters, while longer-term concerns are rated less highly.
- The most informed investors polled believe it will take US corporates some four and a half years to be ready for IFRS. They ask that convergence plans aim for full convergence, allowing adequate time for investors and industry to adjust.
- Awareness of IFRS among US-based investors is modest: when asked, only 34% of investors felt able to cite specific differences between US GAAP and IFRS.
- However, 38% of investors said they were comfortable comparing statements prepared under IFRS with statements prepared under US GAAP.
- Investors saw marginal differences between IFRS and US GAAP, with 22% of investors claiming that the quality of disclosures under IFRS is higher, versus 25% who favoured US GAAP.
- Among investors with a solid understanding of IFRS, however, the balance shifts to 40% to 21% in favour of IFRS.
Sue Almond adds, “While there are clearly challenges and reservations highlighted in the survey, attitudes to IFRS appear to be changing in the US, irrespective of any action by the SEC. The more familiar investors are with IFRS, the more confidence they have in the standards, which echoes the experience in countries that have already adopted IFRS.”
Questions remain for the future, as looking ahead ACCA's report also identified the issues that are most responsible for shaping US investors' attitudes towards IFRS. By order of significance, these are:
- Will IFRS adoption lead to reduced complexity for US corporates?
- Is IFRS adoption going to lead to a dangerous loss of US influence over the standard-setting process?
- Are US corporates likely to see cost savings and synergies emerging as a result of IFRS adoption?
- Will IFRS adoption make it easier to compare the performance of US corporates with that of other companies overseas?
- Are US auditors likely to second-guess management more frequently as a result of IFRS adoption?
Sue Almond concludes, “A better understanding of global standards produces greater assurance – and it will also prompt more investors to learn about the International Accounting Standards Board and the work they are doing on convergence. The accountancy profession – on the global stage as much as in the USA – will have a significant role to play in educating the business community about global standards and needs to prepare for this.”
About the report:
- The survey of investors was carried out by Forbes Insights in two waves – a first wave between May 18-21, 2012, targeting occupations involved in the management of investments, and a ‘booster' wave between June 25-July 4 2012, targeting professional investment managers, asset managers and fund managers.
- Both waves drew from the Forbes Insights panel. Overall, the survey achieved 493 responses from individuals with a combined $2.3 trillion under management.
ACCA (the Association of Chartered Certified Accountants) is the global body for professional accountants. We aim to offer business-relevant, first-choice qualifications to people of application, ability and ambition around the world who seek a rewarding career in accountancy, finance, and management. We support our 154,000 members and 432,000 students in 170 countries, helping them to develop successful careers in accounting and business, with the skills required by employers. We work through a network of over 80 offices and centres and 8,400 Approved Employers worldwide, who provide high standards of employee learning and development. Through our public interest remit, we promote appropriate regulation of accounting and conduct relevant research to ensure accountancy continues to grow in reputation and influence. www.accaglobal.com.
About Forbes Insights:
Forbes Insights is the strategic research practice of Forbes Media, publisher of Forbes magazine and Forbes.com, whose combined media properties reach nearly 50 million business decision makers worldwide on a monthly basis. Taking advantage of a proprietary database of senior-level executives in the Forbes community, Forbes Insights' research covers a wide range of vital business issues, including talent management, corporate social responsibility, financial benchmarking, risk and regulation, and doing business in emerging markets. www.forbes.com/insights
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