What's Going on With IFRS?

There hasn’t been much news lately about the adoption of IFRS in the United States, and I have received some questions from customers and partners on this topic.  So here’s a quick update.


Most of the world has moved to International Financial Reporting Standards (IFRS) with the last holdouts being Japan, India and the United States.  Japan has started the transition process and should be complete by 2015 and India will be in transition through 2018.  The Financial Accounting Standards Board (FASB) has been discussing and working with the International Accounting Standards Board (IASB) on the convergence of US GAAP and IFRS for many years.   The reality is that the United States Securities and Exchange Commission (SEC) is not going to force a switch entirely over to IFRS, but is proposing a slow convergence of US GAAP with IFRS principles over time.  In fact the latest word being used to describe this process is “condorsement”, as per a proposal issued by the SEC in May 2011. 


There are a number of convergence projects now being worked on between the two standards committees, but the four that are in focus currently relate to Financial Instruments, Revenue Recognition, Financial Statements and Leases.  Exposure drafts on these topics were released for public comment back in 2010 and SEC board reviews occurred in 2011.  The expected timeline for adoption of the revised US GAAP rules in these areas is highlighted below.


Revenue:  Exposure draft closed, comment period over, the boards are mulling the exact wording.   This is expected to be finalized in late 2012.  Effective date unknown – but not likely until 2015, with retroactive reporting back to 2013.


Leasing:  Principles established, exposure draft still being finalized.  Anything that meets the definition of a lease will be on the balance sheet as a right to use asset and a lease liability.  P&L expense will distinguish the interest element from the usage element.  Some issues still to be resolved.  This is expected to be finalized in 2013.


Financial Statement Reporting: Postponed indefinitely.


Financial Instruments:  Progress, dialogue this year between FASB & IASB.  Basel III, Dodd-Frank, JPMorgan Chase, Greek exposure all factors in getting this one done.  No final dates at this point.


The SEC has not made their announcement, but everyone is pretty certain that what they will do is ask the FASB to expose the IFRS statements, other than the 4 convergence ones listed above, as ASUs (Accounting Standards Updates) to US GAAP: that is, FASB will adopt IFRS, not companies.    Companies will then adopt the IFRS statements as US GAAP Updates as FASB rolls them out, but absolutely no details are available on that program currently.


Oracle has staff carefully tracking these developments and provides features and capabilities in our financial management applications designed to help customers migrate smoothly from their local GAAPs to IFRS.  For news and updates on US GAAP/IFRS convergence projects, please consult the following resources:


US SEC:  http://www.sec.gov/


FASB:  http://www.fasb.org/home


IASB:  http://www.ifrs.org/Home.htm


For information about how Oracle’s financial management solutions can help with the transition to IFRS:


http://www.oracle.com/us/solutions/corporate-governance/ifrs/061806.html


Please contact me if you have any questions or need more information:  john.orourke@oracle.com

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