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April 30, 2008

US Financial leaders ill-prepared for IFRS, study finds

The majority of US financial leaders are not prepared to adopt IFRS, according to a Grant Thornton US survey. Three quarters of chief financial officers and controllers that took part in a survey of more than 220 financial leaders admitted they have no experience preparing financial statements using International Financial Reporting Standards (IFRS). A similar proportion supported the use of principles-based standards while 69 percent believed accounting standards are too complex.

Grant Thornton US chief executive Ed Nusbaum told the International Accounting Bulletin the study confirms the verdict of IFRS experts speaking with The Accountant recently – that the US is well behind Europe and the rest of the world in terms of understanding IFRS and being able to implement it in the near future.

Nusbaum predicts the US Securities and Exchange Commission could introduce the choice for US companies to prepare financial statements using IFRS as early as 2010, but a more realistic timeframe for the corporate community to be prepared would be 2013.

“In order for this to work, corporate America has to be prepared. It is not just about having the accountants at Grant Thornton or at any other firm prepared, it is a matter of having the individual controller and the accounts receivable clerk and all the massive accounting staffs in companies prepared. That is really the driving force, not when the accounting firms will be prepared,” he said.

Nusbaum predicted the impact of IFRS to the US economy will be larger and more widespread than that of the Sarbanes-Oxley Act. “In terms of a cost for a single, large public company it is hard to tell whether it will be more or less than the previous cost. In terms of the overall effort across the United States, it is much more massive because you are really talking about a fundamental change in accounting. Every professor in every university across the US, every student, every accountant within a company, every accountant in public accounting firms like Grant Thornton need to be educated,” he explained. “There are tens of thousands if not hundreds of thousands of non-listed private companies in the United States that could be impacted by this that are not at all by the Sarbanes-Oxley legislation.”

Grant Thornton has already begun an exercise to train between 2,000 to 2,500 staff at a cost of “hundreds of thousands if not millions” of dollars. Nusbaum said the overall IFRS training effort will be phased in over years and could involve 100 hours per person. “I think all of the firms that are global need to be prepared on IFRS and Grant Thornton is already prepared and will be even further prepared as it moves on in the US,” he said.

Arvind Hickman

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