Professional Documents
Culture Documents
Murad Moqbel
PhD Student
Texas A&M International University
Laredo, TX 78041
Phone: 620-340-0888
Email: muradmoqbel@dusty.tamiu.edu
Aziz Bakay
Texas A&M International University
Laredo, TX 78041
Phone: 956-489-0075
Email: azizbakay@dusty.tamiu.edu
results.
Abstract
International Financial Reporting Standards (IFRS) have been adopted by several countries
around the world as a common accounting and financial language. However, the US is yet to do
so. In this study, in my turn, I examine whether the US academics (accounting and auditing
students and professors) as well as practitioners (auditors, accountants, CPAs, and financial
analysts) are ready to embrace IFRS as a common accounting and financial reporting language. I
discuss the extent to which they are familiar and ready for IFRS as well as their perception about
the benefits and challenges in adopting IFRS. I further touch on IFRS Benefits and Challenges,
The fast pace of globalization and the international financial markets have stimulated the need
for a common financial language. This common language is IFRS which is under the auspice of
setting body based on London. The IASB morphed from another organization called the
international accounting Standards Committee (IASC) that was established in 1973 (Kennedy
2010). Several countries around the world have already adopted IFRS and few are to follow.
Around 120 countries have completely or partially embraced International Financial Reporting
Standards (IFRS 2010). The European Union has made it mandatory for publicly traded
companies to use IFRS to prepare their financial statements (Brackney and Witmer 2005). Other
countries soon to follow include Canada and Korea which announced to adopt IFRS by 2011.
the Financial Accounting Standards Board (FASB) and the International Accounting Standards
Board (IASB) in their meeting in September 2002 reached an agreement, called the Norwalk
agreement, to converge on a single set of accounting standards. They also agreed to make their
existing financial reporting standards fully compatible and to coordinate their future work
There around 11,000 firms registered with the U.S. Securities and Exchange Commission (SEC),
of which about 1,100 are non-U.S. companies (Oracle Corporation 2008). In 2005, U.S. SEC
allowed non-U.S. firms to submit their financial statements in compliance with either U.S.
GAAP or IFRS; on the condition they reconcile discrepancies in the results between the two. But
in 2007, the U.S. SEC voted to drop the reconciliation requirement for financial statements for
the year 2007 (Smith 2008). The United States was scheduled to require all publicly traded
companies to prepare their financial statements based on IFRS by 2014 as it was announced by
the U.S. SEC in 2008 (Kennedy 2010). However, the U.S. SEC decided in February 2010 that
2015 might be the earliest possible date for IFRS adoption by the U.S., calling for more study of
The US Generally Accepted Accounting Principles (U.S. GAAP) and International Financial
Reporting Standards have some similarities and differences. One of the differences is that U.S.
(Arthur 2005). The US GAAP is intended to enforce compliance by having detailed rules, while
professors) as well as practitioners (auditors, accountants, CPAs, and financial analysts) are
ready to converge to IFRS as a common accounting and financial reporting language. I do this by
surveying and collecting data on the perception of a sample of academics and practitioners
regarding familiarity, readiness, benefits and challenges, and proper plans to be used in the
process of convergence in accounting standards. Results shows that (1) the majority of
respondents believe that auditors, accountants, and accounting students are ready for the
convergence to IFRS; (2) convergence to IFRS can increase global comparability; minimize
barriers to global competition for capital, enable investors to evaluate investment options in a
global marketplace, enable management and auditors to exercise more professional judgment,
create uniformity in global financial reporting including audit reports; (3) initial cost of
transition plan and issues pertaining to IFRS, lack of education, understanding, and experience
by preparers of financial reports with the use of IFRS, lack of coverage of IFRS in financial
textbooks should be taken into consideration when making a decision about whether to adopt
IFRS or not; (4) a proper plan to transition all U.S. companies to IFRS requires IFRS training for
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The perception of both academics and practitioners in this study are of importance to companies,
policy makers and regulators, investors, auditors, as well as educators in order to prepare for
The remainder of this paper covers IFRS benefits and challenges, IFRS education and training,
information technology role, research questions, research methods, results and discussion, and
conclusion.
Convergence to IFRS can provide benefits as well as challenges. One of the advantages of
having a one common set of financial standards is comparability of apple to apple in terms of
financial reporting of global companies (Smith 2008). Using IFRS can enable cross-border
investment and facilitates the flow and access to global capital markets (Anderson 1993). Other
benefits of IFRS to companies include reduction of diversity, complexity, and the possibility of
mistakes in the financial reporting process. As for the challenges, they can be cultural, political,
and legal (Rezaee et al 2010). The major challenge of converting to IFRS is costs associated with
the adoption. These costs can stem from staff training and education to personnel to prepare them
to use IFRS and from implementing information technology systems. The U.S. SEC estimates
that the transition to IFRS from U.S. GAAP in the first year of filing will cost U.S. firms
between 0.125 percent and 0.13 percent of their revenue, predicting that early adoption will cost
a firm $32M in 2010 (Johnson and Leone 2008). Another challenge to convergence is the
overcoming of the resistance to change as both academics and practitioners are used to US
GAAP and it will be very hard to change (Rezaee et al 2010). Several schools of businesses as
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well as accounting programs here in the USA have shortages of professors as well as curriculum
Training accountants, auditors, financial analysts, valuation experts, and actuaries is a very
important step for convergence to IFRS. Industry groups as well as professional associations
have started to include IFRS in their training materials and testing, and several universities and
colleges started including IFRS in their curricula (Kroll 2009). Customized courses offered by
international subject matter experts are provided by some training firms such as IASeminars.
Those seminars can range from one day to several days customized to clients needs. The big
four have been of a great help in the training and education part of preparation to IFRS. For
example, Grant Thornton, in collaboration with IASeminars, has been offering IFRS courses as
well as guest speakers in Canada in preparation for IFRS (Grant Thornton 2010). Deloitte
Touch Tohmatsu is offering free e-learning modules on IFRS available to download on its
students for IFRS and international accounting (Kroll 2009). This grant is aimed at updating
offering IFRS Ready" program that consists of videos for students that explain IFRS and its
impacts (PricewaterhouseCoopers 2010). In further step towards preparation for IFRS, American
Institute of Certified Public Accountants (AICPA) announced in 2009 that CPA exams, starting
Jan. 1, 2011, for the first time will include testing on International Financial Reporting Standards
(Journal of Accountancy 2009). Since IFRS are principle-based standards, the way it has to be
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taught to concentrate on reasoning and strengthening the judgment abilities rather than basing it
on memorization of rules.
Information technology can be of a great help for accounting, financial analysts, and auditors in
the process of transition to IFRS. Switching to IFRS will require a great amount of information
technology applications change. Firms financial departments will need to identify the scope of
the information applications needed by specifying the type of information they need from each
application. They will need to decide whether their current software such as Enterprise Resource
Planning (ERP), a management information system that integrates different areas such as
planning, inventory, purchasing, accounting, financing, marketing, human resources, etc, can
applications that enable companies to generate reports that comply with current requirements and
respond quickly to new changing standards requirements are SAP ERP Financials, Oracles
consolidation, reporting, and analysis in several GAAPs including IFRS (Oracle Corporation
2008). Firms financial department will have to take into account whether to procure from small
service providers who might not have the expertise or from well-established and reputed
partners. Other things to be considered for the transition process to IFRS from the IT perspective
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Research Questions
In order to expand our understanding of IFRS and its benefits and challenges, I conducted a
survey investigating the different perceptions of academics and practitioners, those who are
familiar with IFRS and those who are not, and those who think that they are ready for IFRS. An
auditors, actuaries, accountants, CPAs, and financial analysts, standard setters, regulators as well
as educators to be familiar with the differences between the US GAAP and IFRS as well as the
Changes in the accounting education and training is imperative in order to prepare for the
adoption of IFRS in the US. Those changes needs to be incorporated in the textbooks and
training materials.
RQ1: Do practitioners and academics have different perspectives regarding whether they are
RQ2: Are those who are more familiar with IFRS more likely to believe that convergence will
have more severe consequences than those who are not familiar?
RQ3: Do practitioners and academics have different perspectives regarding a proper plan to
transition to IFRS?
Research Methods
I adopted most of the questionnaire questions from Rezaee et al (2010). I then conducted a
survey of accounting academics and practitioners to measure their perception on the readiness,
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benefits, challenges, and ways to adopt IFRS (see Appendix A). A survey was distributed to
junior, senior, and graduate level accounting students as well as PhD students and faculty
members teaching accounting in Texas A&M International University. Another set of surveys
was distributed to practitioners through Texas A&M International University accounting and
finance alumni emails list. I included a brief statement explaining the purpose of the survey and
There are four main sections of the survey. The first section asks for demographic and
background information. The next sections ask respondents for their perception on familiarity,
readiness, benefits, challenges, and ways to facilitate the adoption of IFRS. I used the t-tes to
Panel A of Table 1 shows that 28 responses were received from academics and 35 from
Panel B shows that less than half of the respondents are familiar with IFRS, with a mean of 2.43
for academics and 2.40 for practitioners based on a 5-point scale. The differences in responses
regarding the degree of familiarity with IFRS between academics and practitioners are not
statistically significant. These results may tell us that respondents are not familiar with IFRS.
The perspectives regarding challenges to moving towards IFRS are listed in order based on their
importance as represented by the mean coefficient of responses and are shown in table 1: lack of
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education, understanding, and experience by preparers of financial reports with the use of IFRS;
transition plan and issues pertaining to IFRS; Lack of sufficient involvement of global regulators
in the IASB standard-setting process; Initial cost of convergence; and last perceived uncertainties
surrounding IFRS. As for the perceived challenges for converting to IFRS, costs can lead the list
as mentioned earlier that the U.S. SEC estimates the cost of the first year of conversion per
company can be between 0.125 percent and 0.13 percent of their revenue (Johnson and Leone
2008). U.S. firms can learn a lot from the experience of Europeans and Canadians in order to
Results of the questions about a proper plan to transition all U.S companies to IFRS are shown in
Table 2. The majority of academic respondents (about 80%) reported training for auditors and
integration of IFRS education in the accounting curriculum to be proper plant for convergence to
IFRS. About 82% of academic respondents also thought that IFRS training for management is
important but less important for investors. On the other hand, around 86% of practitioners
believe that IFRS education in the accounting curriculum is crucial as a proper way to transition
As for the perceived benefits of convergence to a global set of accounting standards, both
categories results combined are listed in order based on their importance as represented by the
informed global marketplace; IFRS create uniformity in global financial reporting including
9
audit reports; minimize barriers to global competition for capital; position IFRS to be the
globally accepted accounting language; and IFRS enable management and auditors to exercise
more professional judgment. The differences in responses between academics and practitioners
are statistically significant only for one of the perceived benefits of IFRS which is create
So, from the combined list we can see that the less severe obstacles for convergence to IFRS
IFRS; and required changes in auditing standards; transition plan and issues pertaining to IFRS
to be the least severe obstacles for convergence to IFRS than academicians. To mitigate the lack
of education, understanding, and experience by preparers of financial reports with the use of
IFRS as well as the lack of coverage of International Standards on Auditing (ISAs) in auditing
textbooks, firms can utilize the free online learning materials provided by some of big
accounting firms and start the training and preparing plans for their accounting information
systems from now. Firms can also make use of the learning experience of other countries such as
Canada and the European countries. Schools need to start teaching and embed IFRS into their
accounting degree requirement as a preparation for IFRS by the time the U.S. SEC announces its
adoption to it.
Research questions results are presented in table 1, 2, and 3. RQ1 asks: Do practitioners and
academics have different perspectives regarding whether they are ready to embrace IFRS? Table
3 and panel C both present a comparison by academics and practitioners. In panel C, there is no
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significant difference between academics and practitioners. Also when the answer is confined to
those who are familiar with IFRS, still there is no significant difference between the two groups.
RQ2 asks: Are those who are more familiar with IFRS more likely to believe that convergence
will have more severe consequences than those who are not familiar? Table 3 shows a
categories of not familiar and familiar. Regarding the extent of familiarity, choices 1, 2, and
3 = not familiar, while choices 4 and 5 = familiar. Significant differences were found on 4
answers. Those answers are the following: initial cost of convergence; and required changes in
auditing standards; position IFRS to be the globally accepted accounting language. Those who
are familiar with IFRS believed that the initial costs of convergence as well as the required
changes in auditing standards are much severe obstacles than those who are not familiar. In terms
of the benefits of the adoption of IFRS perceptions, the familiar respondents perceive that
positioning IFRS to be the globally accepted accounting language more than those who are not
familiar.
RQ3 asks: Do practitioners and academics have different perspectives regarding a proper plan to
transition to IFRS? Based on the respondents who are familiar with IFRS, there is only one
difference from the four proper plans listed in the questionnaire. This difference is in the proper
plan to transition all U.S. companies to IFRS requires adjustments to IFRS training for investors.
80% of those who are familiar with IFRS believe that IFRS training for investors as a proper
plan to transition all U.S. companies to IFRS as compared to only 50% of those who are not
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Conclusion
Convergence to a global set of accounting standards can help global comparability in financial
reporting. Allowing non-U.S. firms to submit their financial statements in compliance with
either U.S. GAAP or IFRS in 2005 was a positive sign by the SEC that it has a serious intention
to a complete convergence between US GAAP and IFRS which in its turn contributes to the
achievement of global comparability. There are still several issues that need to be sorted out
before moving towards a complete convergence. The global acceptance of IFRS and its use by
several countries around the world urges the US to take serious steps to convergence.
In this paper, I examined three research questions, the first asks whether practitioners and
academics have different perspectives regarding whether they are ready to embrace IFRS. The
second asks whether those who are more familiar with IFRS are more likely to believe that
convergence will have more severe consequences than those who are not familiar. The third
examines whether practitioners and academics have different perspectives regarding a proper
plan to transition to IFRS. The answer to the first question was clearly no. There was no
significant difference between academics and practitioners in terms of whether they are ready for
IFRS. As for the second question, significant differences were found on 4 questions. Those
questions are the initial cost of convergence; required changes in auditing standards; and position
IFRS to be the globally accepted accounting language. Those who are familiar with IFRS
believed that the initial costs of convergence as well as the required changes in auditing
standards are much severe obstacles than those who are not familiar. In terms of the benefits of
the adoption of IFRS perceptions, the familiar respondents perceive that positioning IFRS to be
12
the globally accepted accounting language more than those who are not familiar. The answer to
the third question was only one difference which is that there is no difference between academics
and practitioners in the proper plan to transition all U.S. companies to IFRS.
Most respondents believe that comparability and uniformity of financial reporting including
audit reports under IFRS are the key principles of moving toward a single set of standards. ,
Convergence to IFRS is expected to minimize barriers to global competition for capital and
References
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Anderson, A. 1993. The globalization GAAP. Management Accounting (August), 5254.
Brackney, Kennard S. and Philip R Witmer. 2005. The European Union's Role in International
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at: http://www.journalofaccountancy.com/Issues/2010/Apr/20102658
http://www.deloitte.com/view/en_GX/global/services/Audit/global-ifrs-offerings-services/ifrs-
implementation-services/ifrs-elearning/index.htm
http://www.grantthornton.ca/services/IFRS/IFRS_learning
Herrmann, Don and Ian P.N. Hague. 2006. Convergence: In Search of the Best. Journal of Ac-
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http://www.journalofaccountancy.com/Web/20092194.htm
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Kroll, Karen. 2009. Is it U.S. GAAP IFRS at U.S. universities? Financial Executive. Available at
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Tables and Panels
Academics Practitioners
t-test
Mean Standard Mean Standard significance
Response Deviation Response Deviation
16
T-test, significant at 0.05 level. *
T-test, significant at 0.01 level. **
Table (1)
2. Please indicate the extent of severity of the following in a move toward complete convergence
to IFRS by circling the appropriate number (1 = not severe; 5 = severe; NA = no opinion).
Academics Practitioners
5. Transition plan and issues pertaining to IFRS 3.18 1.156 3.37 1.330 .367
17
Table (2)
Academics Practitioners
1. Minimize barriers to global competition for capital 3.54 1.666 3.80 1.410 .465
Questionnaire Section 4
e. IFRS education in the accounting curriculum .79 .418 .86 .355 .538
Comparison of Responses between Those Familiar with IFRS and Those Not Familiar
Questionnaire Section 1
2. The extent to which you auditors, accoun- 2.97 1.066 3.27 1.335 .668
tants, and accounting students are ready for
18
the convergence to IFRS
Questionnaire Section 2
e. IFRS education in the accounting curricu- .73 .450 .93 .258 2.529
lum
T-test, significant at 0.05 level. *
T-test, significant at 0.01 level. **
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Appendix A
Student
Education:
Less Than High School ( ) 4-Year College Degree (BA, BS) ( )
High School/GED ( ) Masters Degree ( )
Some College ( ) Doctoral Degree ( )
2-Year College Degree Associate ( ) Professional Degree (MD, JD) ( )
1. Please indicate the extent to which you are familiar with International Financial
Reporting Standards (IFRS) by circling the appropriate response (1 = not familiar; 5 =
20
very familiar).
1 2 3 4 5
1. Please indicate the extent to which you think auditors, accountants, and accounting
students are ready for the convergence to International Financial Reporting Standards
(IFRS) by circling the appropriate response (1 = not ready; 5 = very ready).
1 2 3 4 5
2. Please indicate the extent of severity of the following in a move toward complete
convergence to IFRS by circling the appropriate number (1 = not severe; 5 = severe; NA =
no opinion).
21
6. Lack of education, understanding, and
experience by preparers of financial reports with 1 2 3 4 5 NA
the use of IFRS
5. Please rank the importance of the perceived benefits of convergence to IFRS as a single
set of accounting standards by circling the appropriate number (1 = least important; 5 =
most important; NA = no opinion).
Least Most No
Important Important Opinion
6. A proper plan to transition all U.S. companies to IFRS requires adjustments to (check all
that apply):
___ a. IFRS training for investors ___ d. IFRS training for management
___ b. IFRS training for auditors ___ e. IFRS education in the accounting
curriculum
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7. What do you think is the single most important reason that the US should switch from
US GAAP to IFRS?
8. What do you think is the single most important reason that the US should NOT switch
from US GAAP to IFRS?
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