International Financial Reporting Standards (IFRS)

Contemplating a corporate transition to International Financial Reporting Standards (IFRS)?

Experience the insight, ideas and attention of knowledgeable advisors trained in international accounting issues and compliance. We understand the importance of minimizing disruption and controlling costs associated with your company’s conversion to IFRS. BKD is one of the largest members of Praxity, AISBL, a global alliance of independent firms that enhances our ability to serve the dynamic needs of multinational clients. Our services include:  

  • Audits of IFRS financial statements and reporting packages
  • IFRS impact evaluations
  • IFRS adoption planning
  • IFRS accounting support

Scott Fields


Scott Fields


Manufacturing & Distribution

2700 Post Oak Boulevard, Suite 1500
Houston, TX 77056-5829


John Kmetz


John Kmetz


Manufacturing & Distribution

1201 Walnut Street, Suite 1700
Kansas City, MO 64106-2246

Kansas City

Bryan Wright


Bryan Wright


Manufacturing & Distribution

201 N. Illinois Street, Suite 700
P.O. Box 44998
Indianapolis, IN 46244-0998 (46204)


Changes Coming?

Feeling overwhelmed by the anticipated conversion to International Financial Reporting Standards (IFRS)? Take a deep breath; BKD, LLP can help. While global accounting standards seem likely to come to the U.S., there is plenty of time to prepare for what promises to be a significant shift in the way you prepare corporate financial statements. Now is the time to evaluate what steps your company should take to complete the IFRS transition in the most efficient and cost-effective manner.

BKD is carefully monitoring the gradual transition toward IFRS from U.S. generally accepted accounting principles (GAAP), and several of our advisors are knowledgeable about the major differences between the two standards. Our experts have compiled the following information to answer your questions about IFRS. Given the evolving nature of this hot topic, we know more questions will arise in the near future. Please bookmark this webpage and visit it frequently to access timely IFRS updates. If your inquiries require more attention, please contact your BKD advisor.

Background on IFRS

On August 26, 2008, the U.S. Securities and Exchange Commission (SEC) voted unanimously to issue a proposed “roadmap” that addresses when and how IFRS might be phased in for U.S. issuers and a proposed rule that would allow the optional use of IFRS for a limited number of companies. The roadmap was temporarily shelved in light of the financial crisis, but Chief Accountant James Kroeker has recently indicated that the SEC will soon provide more clarity on its intentions for IFRS.

The SEC has eliminated the reconciliation of U.S. GAAP for foreign private issuers and is exploring whether U.S. issuers should be allowed to prepare financial statements in accordance with IFRS. These actions, as well as other indicators, are a clear sign the SEC is moving toward of IFRS.

Some U.S. companies are already moving toward IFRS, which are now permitted or required for licensed companies in some 117 nations, including the European Union. Canadian public companies are facing a January 1, 2011, deadline to adopt IFRS, and many have reported challenges related to staffing shortages, internal systems and identifying anticipated changes in their financial statements, according to a recent survey by the Canadian Financial Executives Research Foundation. Mexico will begin its shift to IFRS in 2012.

Under the roadmap proposal, the SEC has set 2011 as the deadline for deciding whether to mandate the use of IFRS by 2014.

What is IFRS?

IFRS are a set of accounting standards developed by the International Accounting Standards Board (IASB) that serve as the framework for many publicly traded companies outside of the U.S. to report their financial results.

What is the IASB?

The IASB is an independent, privately funded accounting standard-setting body based in London. The IASB is appointed and overseen by the IASC Foundation, an independent non-profit foundation. The IASB consists of 14 members from nine countries, including the United States. The IASC Foundation was formed in 2000, and the IASB was formed in 2001, at which time the IASB succeeded the International Accounting Standards Committee (IASC).

What is the breadth of IFRS?

The IASB did not issue its first new standard, IFRS 1, until 2003. To date, there are only eight IFRS standards. However, adoption of IFRS also comprises:

  • 41 International Accounting Standards (IAS), the body of standards issued by the board of the IASC prior to the formation of the IASB
  • 17 interpretations issued by the International Financial Reporting Standards Interpretation Committee (IFRIC)
  • 11 abstracts issued by the standing interpretation committee (SIC), the predecessor body of IFRIC
  • The Framework for the Preparation and Presentation of Financial Statements, which describes basic concepts by which financial statements are prepared, and guides the IASB in development of standards

Together, IFRS and IAS are generically referred to as IFRS and, in aggregate, fit into one book that is approximately 2,000 pages in length and 2 inches thick.

Why is IFRS being considered in the U.S.?

Consideration of IFRS largely began in 2002 with the issuance of the “Norwalk Agreement.” The Norwalk Agreement is a memorandum of understanding between the Financial Accounting Standards Board (FASB) and the IASB acknowledging their commitment to the development of high-quality, compatible accounting standards that are as similar as possible and can be used for both domestic and cross-border financial reporting.

In 2007, the SEC announced it would accept financial statements prepared in accordance with IFRS, as issued by the IASB, by foreign filers in the U.S. without the previously required reconciliation to U.S. GAAP. The SEC also issued a Concept Release in 2007, asking if U.S. public companies should be given an option to follow IFRS instead of U.S. GAAP.

Convergence vs. conversion?

It is important to distinguish between the Norwalk Agreement—a convergence of two sets of standards—and the possible conversion to one single set of high-quality, global accounting standards to be mandated or permitted by the SEC. Convergence is an effort to remove existing differences between U.S. GAAP and IFRS, and for the FASB and IASB to work together on a prospective basis. While much has been accomplished toward convergence over the past few years, many significant differences still exist today. Complete convergence may not be easily or quickly achieved due to differing cultural, legal, regulatory and economic environments.

Conversion on the other hand, if mandated or permitted, would require the use of a single set of standards, i.e., IFRS, thereby eliminating the existing differences between U.S. GAAP and IFRS and purportedly increasing comparability of financial results among reporting entities from different countries.

What will the SEC do?

The SEC’s proposal is expected to include a phased transition over three years, beginning with large accelerated filers’ calendar year 2014 financial statements, followed by accelerated filers beginning with calendar year 2015 financial statements and concluding with nonaccelerated filers beginning with calendar year 2016 financial statements. The roadmap also calls for the SEC to reconsider the requirement to use IFRS based on other defined milestones such as data tagging (XBRL), accounting education and funding of the IASC Foundation.

Is this solely a public company issue?

Not necessarily. While the SEC can only require adoption of IFRS forpublic companies, many nonpublic entitiesmay choose to adopt IFRS similarto the trickle down experienced with theSarbanes-Oxley Act. Also, the governing council of the American Institute of Certified Public Accountants (AICPA) approved certain amended rules of the Code of Professional Conduct in 2008 to recognize the IASB as an international accounting standard setter. Adoption of IFRS also could ultimately be mandated by legislative or regulatory action.

The FASB is continuing with the convergence project to eliminate as many differences between U.S. GAAP and IFRS as possible. It is unclear whether nonpublic companies will ever be required to adopt IFRS.

Is this solely a financial reporting issue?

No. This will have a significant impact on operational and other information technology systems. Two separate systems may need to be maintained during the conversion period. Other key areas include tax implications, effects on loan and debt agreements and other contracts, regulatory reporting requirements, compensation arrangements, use of actuaries and other valuation specialists, personnel training and communication with investor relations groups.

IFRS is often referred to as principles-based. What does this mean?

This is one fundamental difference between IFRS and U.S. GAAP. IFRS standards are more broad and “principles-based” than U.S. GAAP, which are more “rules-based.”  IFRS has generally avoided issuing interpretations of its own standards, which provides greater flexibility to preparers and auditors. In contrast, U.S. GAAP is more prescriptive with far more “bright-lines,” numerous interpretations and sometimes comprehensive implementation guidance.

What should I do?

Widespread use of IFRS in the U.S. for nonpublic entities is dependent on many factors, e.g., acceptance by the IRS, other regulators and lenders and training for private and public accountants.

Except for some of the largest multinational companies, the best course of action is to monitor SEC and FASB developments regarding IFRS as well as the various efforts to allow or require nonpublic companies to adopt IFRS.

What is BKD doing?

We are continually tracking developments in this area and advisors within the firm are trained and able to address your needs as they arise. We are committed to providing the necessary expertise in this area to better serve our clients.

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