Will Accounting Majors be Required to Learn International Financial Reporting Standards?

In order for financial statements to be comparable, there must be a set of agreed upon methods to ensure everyone is following the same set of rules.  This is comparable to ensuring everyone uses the same street light colors of green and red for “go” and “stop.”   In regards to their own set of “accounting rules,” The United States has adapted the Generally Accepted Accounting Principles (GAAP), which tells businesses how and when they are to record income and expenses, along with a long list of other accounting procedures. However, there is a popular accounting standard with its own set of “rules” called the International Financial Reporting Standards (IFRS).   Many countries have already decided to converge from their own set of accounting standards to International Financial Reporting Standards.

If you’re considering sitting for the CPA Exam, you should be aware that it now requires you to be tested on your understanding of both GAAP and IFRS accounting, which should allow new CPAs the ability to quickly understand and help companies transition over to IFRS, if the United States ever decided to converge.  However, this would not happen until the SEC officially crowns IFRS as the official accounting standard within the United States over GAAP accounting.  But the question remains, would this ever occur?

The answer to this is unfortunately not completely known, as many questions still need to be answered.  While the SEC issued release Nos. 33-9109 and 34-61578, stating the support of the United States to “Converge to Global Accounting Standards,”  there is no decisive time period stated, but the FASB and IASB are attempting to get the United States converged to IFRS by 2015. Please read the IFRS FAQ by the AICPA for more details.  However, US colleges are still teaching GAAP accounting  accounting in the majority of their accounting courses, and have not made IFRS accounting a mandatory subject for accounting majors, despite major talk of the United States converging. This is likely due to head college professors doubting the SEC's ability to converge to a whole different set of accounting standards.

I believe the United States’ willingness to converge to a whole new set of accounting standard is not going to happen, due to the lack of their willingness to change.  For example, consider the United State’s unwillingness to converge to making the metric system the official measuring standard. They are now only one of three countries that have not made it the official measuring standard.  In short, The United States simply does not enjoy giving up their own ways of doing things.   I believe there are many reasons behind this.  One being the fact that the United States has predominately been one of the most financially secure and successful countries, thereby making them believe their methods is superior.  It could even be the possibility that the United State’s culture tends to be a more individualistic, thereby making us think each should “be of their own,” and not necessarily follow a trend set by others.

Regardless of the reasoning, I believe it’s unlikely that the SEC will mandate public companies within the United States to converge to IFRS accounting.  Additionally, it appears colleges are also not optimistic about IFRS conversion, and are still going to focus on primarily teaching GAAP accounting.