The Roman emperor Augustus said it first: Festina Lente, or Make Haste Slowly.  When it comes to IFRS, companies are taking his advice. 

Only one thing is now clear about IFRS in the United States: no company intends to invest in the transition without a date certain from the SEC.  Moreover, if Canada is any precedent, many companies may be slow to invest even in the face of a date certain.  That was the word both from the podium and from the crowd at a recent conference on financial reporting.

Speakers from United Technologies Corporation, Bank of America, URS Corporation and Gowling Lafleur Henderson addressed IFRS transition at the Marcus Evans Financial Reporting Excellence conference in Boston on May 18.  You may want to know:

•  IFRS could change your taxes even if you don’t report in IFRS.  When deciding how much of a firm’s revenue is subject to income tax in their jurisdictions, tax authorities tap databases of comparable firms.   So U.S. companies on GAAP and Canadian companies on IFRS will soon be setting benchmarks for each other, despite the differences in their accounting standards.  Moreover, authorities also consider local asset presence as a factor in their determination.  With capitalization of R&D under IFRS, companies may find their local asset footprint shifting, said Dale Hill, partner and national leader of Gowling Lafleur Henderson’s Transfer Pricing Competent Authority Group.
•  Beware of outside advisors. Speakers were unanimous in warning against relying too much on outside advisors for IFRS transition, both because of the expense and because of the importance of developing IFRS expertise in-house. 
•  Expect IFRS to put a smile on the face of your IT department.  Daniel Crawford, IFRS manager at United Technologies Corporation said, “When we tell our systems people that we'll need dual reporting capability on everything by 2011, they laugh at us."
•  Customer loyalty programs imply deferred revenue under IFRS.  “In order to avoid carrying this deferred revenue indefinitely, Canadian airlines recently changed the redemption time limit on miles,” said Karen Ingwerson, senior manager, accounting policy at Bank of America.
• \Government contractors face a challenge.  Said Marianne Aguiar, director, revenue assurance, URS Corporation, “Our corporate controller was talking with a government auditor and asked him about IFRS. The auditor replied, ‘What’s IFRS?’”
• IFRS is not just an accounting project.  Again, speakers were unanimous in pointing out that IFRS may change the score for every aspect of a business..  To focus management attention on IFRS, show how the transition will affect incentive compensation. 

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Who would have thought of accounting as a national security issue? 

David Albrecht is a professor of accounting at Bowling Green State University in Ohio and an opponent of U.S. adoption of IFRS.  For a quick recap of his case against IFRS listen to the podcast of highlights from his interview. 

On his blog, The Summa , Professor Albrecht offers a national security argument against IFRS:

• European adherence to the free flow of capital is self-serving. 

• The economic theory of free flow of capital absolutely requires accounting standards such as today’s IFRS.  Because the U.S. is such a large actor in the world economy, the economic theory of free flow of capital absolutely requires the U.S to discard GAAP and adopt IFRS. 

• Capital can be viewed the same way as other national resources such as precious minerals or the productive capacity for military defense.  Said another way, strategic capital management is an essential aspect of the national security. 

• When viewed from this point of view, it is easy to see that U.S. GAAP and SEC enforcement and the Sarbanes-Oxley emphases on internal controls and auditor inspections are essential to the national security of the United States.

Decisions about accounting policy, like decisions about any other policy, are political decisions.  Let anyone who doubts that read the recent history of mark-to-market accounting by banks.  Professor Albrecht’s mercantilist argument brings to the IFRS discussion a political theme that harmonizes well with the “Buy American” provisions in the Congressional proposals to rescue auto makers  For more detail, visit his blog.  In the fall of 2008, he also marshaled a series of technical arguments against IFRS from some of the most prominent IFRS critics.

 That's former SEC Chairman David Ruder's message to newly appointed SEC Chairman Mary Schapiro. In a frank interview with IFRS Reporter, Chairman Ruder talked about why IFRS adoption by companies is inevitable. He acknowledged that it may not take place on the timetable laid out in the SEC Roadmap, but insisted that it will take place. Why? The alternative would be to put U.S. companies at a disadvantage in the capital markets. Few major U.S. companies have shown any eagerness to transition to IFRS. But that may change because IFRS often allows companies to report higher earnings than GAAP. There aren't many other ways to report higher earnings in a deepening recession. So IFRS could look better and better to companies as the financial squeeze tightens.

         Listen to the highlights to learn: 

• How the financial crisis affects the international accounting agenda

• Why accounting convergence is pointless without auditing convergence--a task that has barely begun.

• What threats to IASB independence will make the FASB necessary even if the U.S. eventually adopts IFRS

• How Paul Volcker brought the bacon home for the IASB
  

A Q&A text and will be available shortly.  The full interview is available here: Part 1, Part 2

Bloomberg reported on February 11 that Mary Schapiro may pick Charles Niemeier to be chief accountant of the SEC.  Niiemeier is a former chairman of the Public Company Accounting Oversight Board.  He has publicly supported mark-to-market accounting, but has been a vocal critic of IFRS.  In a speech delivered in September, 2008 to the New York Society of CPAs, Niemeier said that "International Financial Reporting Standards are not likely to result in benefits to investors in U.S. securities or the U.S. economy," and continued: 

 To explain how I’ve reached this view, I want to take some time today to unpack the arguments in support of the initiative. As I’ve hinted, it is based on a set of assertions that, when explored, turn out to be myths. They are –

• that the current initiative promotes convergence of IFRS and GAAP, a long-standing goal endorsed by the Sarbanes-Oxley Act;

• that IFRS are superior to GAAP, because they are principles-based;

• that switching to IFRS will enhance comparability of financial reports;

• that IFRS will improve investor protection; and

• that the IASB’s standards-setting process is adequately protected from influences unrelated to the quality of standards.

Blogger David Albrecht of The Summa

 has an excellent round-up of information about Niemeier, whom he profiled last year in an eight-part series on IFRS critics. 

The CPA Journal published an interview with Niemeier in December, 2008

Will this put IFRS on ice?  Stay tuned.