US investors slow into adoption of IFRS
By Lazarus IBEABUCHI
UNITED STATES: Findings have shown that 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.
The research was conducted for the Association of Chartered Certified Accountants, ACCA, by Forbes Insights, surveying nearly 500 US-based investors.
Meanwhile, Nigeria actually started considering adopting IFRS in 2007. In fact, the Central Bank of Nigeria (CBN) had directed banks to adopt IFRS from 2008 while the Securities and Exchange Commission (SEC) gave 2009 as the starting year. Nigerian companies have been mandated to comply by the end of 2012.
IFRS are accounting standards issued by the International Accounting Standards Board (IASB), an independent organisation registered in the United States of America (UAS) but based in London, United Kingdom. They pronounce financial reporting standards that ideally would apply equally to financial reporting by public interest entities worldwide.
The research titled “IFRS in the US: An investor’s perspective,” revealed that 57 per cent of US investors expect that the SEC would one day require reporting under IFRS, with more investors agreeing than disagreeing that the long term benefits of adoption would outweigh the costs – 41% against 29%.
Sue Almond, Technical Director at ACCA says: “More investors believe the eventual adoption of IFRS in the US will result in a net benefit to the US 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 US investors thought about the future of IFRS in the US.”
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 US is well prepared for a successful transition to IFRS.”
According to the report, 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.
The report disclosed that awareness of IFRS among US-based investors is modest – when asked, only 34 per cent of investors felt able to cite specific differences between US GAAP and IFRS.
However, 38 per cent 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 per cent of investors claiming that the quality of disclosures under IFRS are higher, against 25 per cent who favoured US GAAP.