Last week, the International Federation of Accountants released a study identifying the obstacles to adopting international financial reporting standards, achieving global convergence to international accounting and auditing standards.

Wong

The report, titled “Challenges and Successes in Implementing International Standards: Achieving Convergence to IFRSs and ISAs,” details the major challenges to international convergence, makes a case for why it’s necessary, and points out examples of successful adoption to serve as models for other countries.

Report author Peter Wong, a former IFAC board member, said, “There is no question that globally consistent and uniform financial systems provide cost-efficiencies to business and greater safeguards to the public.”

However, his study identified six primary challenges to international convergence, including:

The need to develop standards and procedures that will facilitate "high quality translations" that will accommodate the needs of non-native English speakers;

The complexity and structure of the standards;

The frequency, volume, and complexity of changes to the standards;

Challenges for small- and medium-sized entities and accounting firms;

The potential knowledge shortfall among those responsible for implementing the standards; and

Lack of a universal understanding of the meaning of "international convergence."

The study also proposed dozens of action items for governments, regulators, standard-setters, auditors, educators and others. For corporations, the "actions needed" include:

Designing and implementing IFRS transition programs,

and allocate the necessary resources. "This includes

obtaining the commitment from the top down," noted the study.

Preparing to implement IFRSs by identifying differences

and addressing required financial reporting

system changes.

Providing IFRS training for staff at all levels affected by the transition to international financial reporting standards.

Developing an external communications strategy.

Considering at an early stage anticipated changes to

the international standards, and discussing with all

interested parties the changes’ potential effect on

the financial statements.

Wong, who previously was a senior tax partner with Deloitte Touche Tohmatsu and served as president of the Hong Kong Institute of Certified Public Accountants, conducted the study through a series of interviews and focus groups with international regulators, standard setters, and representatives of IFAC member bodies and regional accountancy organizations.

Ricol

IFAC President René Ricol said convergence would be especially challenging to “small- and medium-sized entities and accounting firms and those working in developing nations.”

A related Financial Stability Forum roundtable, discussing the implementation of international accounting and auditing standards, will be held in October.

IFAC represents accountancy bodies in 118 countries, representing more than 2.5 million accountants. The complete study can be downloaded from the box above, right.

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