Goodbye to GAAP?
Currently, US companies follow the U.S. Generally Accepted Accounting Principles (U.S. GAAP) to report their financial information to internal and external stakeholders. This will not be the case in the near future. Back in 2008, the Securities and Exchange Commission (SEC) adopted a proposed roadmap for public review and comments that may lead to the use of International Financial Reporting Standards (IFRS) by U.S. companies with the transition expected between 2014 and 2016.
Why are these changes necessary? As the world’s capital markets continue integrating with great speed, common accounting standards could bring greater confidence and transparency of financial reporting worldwide. A common accounting language used worldwide would give investors greater comparability and trust in the financial reporting of organizations worldwide.
The 2008 SEC roadmap set a three year milestone during which extensive studies, analysis, and research will be conducted in order to make a final decision on whether adaptation of IFRS will be in the public’s best interest. A final decision is expected to be made in 2011.
All businesses currently have to comply with the U.S. GAAP which can be complicated at times. In addition, the transitioning to the new set of standards, if approved, may seem like a tremendous burden to all business owners. As an employer, conversion to IFRS also requires you to review your internal skill set to ensure you have the right people for this complicated task. Further, you must evaluate how the IFRS transition will affect some not-so-obvious processes in your organization, such as how some employees are compensated, your communication with stakeholders, and changes in the way you conduct business with your clients and vendors. The possible changes are still a few years away but planning early is the key to a successful and relatively painless transition.
Please contact Lumix, P.C. Its OAT (Outsourced Accounting Team) department can help you ease the burden of the transition, and make sure that your organization is in compliance with the accounting standards.