Moving from U.S. GAAP to International Financial Reporting Standards will largely impact the way accounting is taught - all the way from the university level to continuing education at the corporate level, and is seen as a joint challenge for the constituencies involved. Imagine you've been teaching and studying French for many years. Then, you get the word that before long you'll be dropping French and using Italian. They're both Romance languages, yes - but the idioms and m idiosyncrasies in one are vastly different from the other.

That's analogous to what's happening in the way undergraduate schools prepare upcoming generations of accountants, as well as how companies and firms train their U.S. statement preparers. It appears likely that within the next three to seven years, U.S. issuers will be using International Financial Reporting Standards (IFRS), as published by the International Accounting Standards Board (IASB), in lieu of U.S. generally accepted accounting principles (GAAP).

Currently, about 12,000 companies in about 100 countries use some form of IFRS. The bottom line for students and practitioners is that they will have to develop an understanding of how IFRS reporting affects financial statements.

As FEI President and CEO Michael Cangemi wrote in the March issue of Financial Executive: "This means that all of the GAAP books you own, everything you learned in college and in your entire career will change."

To prepare for this sea change, it is important to address what schools and firms are doing now and what they should be doing to define the knowledge they want their job candidates and practitioners to have.

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GAAP vs. IFRS: New accounting rules could mean trouble

As if investors do not have enough to worry about, along comes another problem. There is a growing movement to allow, perhaps eventually require, American companies and foreign companies trading in ADRs, to keep their books according to International Financial Reporting Standards, IFRS, instead of the venerable GAAP method we all know and love.

The move to IFRS makes a fair amount of sense given the global nature of capital markets. American investors will simply have to learn to read a balance sheet constructed using different rules. The problem looming on the horizon is, who will construct the IFRS balance sheets?

Currently, accounting degree programs in the U.S. are defined by the requirements for the CPA exam, which does not require familiarity with IFRS. American accounting faculty, overall an older group, teach from textbooks geared towards the CPA exam. Unless and until the SEC actually publicly states a date by which U.S. companies can or must shift to IFRS, nothing will move. Potential accountants will not be exposed to IFRS as part of the curriculum. The CPA exam will not require familiarity with IFRS. Present accounting faculty will not change their course syllabi or textbooks to include IFRS. Many may opt to retire rather than retrain and redesign their courses. Lead time for publishing a new textbook is at least two years, often longer. Who will write the new textbooks?

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The International Accounting Standards Committee (IASC) Foundation today announced the release of the IFRS Taxonomy 2008.

The IFRS Taxonomy 2008 is a complete translation of International Financial Reporting Standards (IFRSs) as published in the IFRS Bound Volume 2008 into XBRL, an eXtensible Markup Language (XML) that is used to communicate information between businesses.

The taxonomy is published in the same languages as the IFRS Bound Volume 2008 and includes support material such as the Taxonomy Architecture Paper and the Taxonomy Extenders Guide. 

The IFRS Taxonomy 2008 represents a complete review of past taxonomies and is also the first taxonomy to undergo an extensive external review by the XBRL Quality Review Team, which comprises experts from the preparer community, securities regulators, central banks, financial institutions and software companies.

The release of the IFRS XBRL Taxonomy 2008 follows the publication of a near final IFRS XBRL Taxonomy in March 2008 for a 60-day public consultation period. The Foundation received comments on the near final taxonomy from all over the world. Comments received focused on technical and minor accounting details and where appropriate were reflected in the final taxonomy.

SEC Approves One-Year Extension for Small Businesses From Auditor Attestation Requirement in Sarbanes-Oxley Act

Washington, D.C., June 20, 2008 — The Securities and Exchange Commission announced today that it has approved a one-year extension of the compliance date for smaller public companies to meet the Section 404(b) auditor attestation requirement of the Sarbanes-Oxley Act. The SEC also announced that it received Office of Management and Budget (OMB) approval yesterday to proceed with data collection for a study of the costs and benefits of Section 404 implementation, focusing on the consequences for smaller companies and the effects of the Section 404 auditor attestation requirements. The results of the study are expected to become available during the extension period.

The Securities and Exchange Commission on Thursday proposed updated rules for energy companies that will require them to provide more detailed information to investors when reporting their oil and gas reserves.

Reserves are an oil company's most valuable asset and a critical indicator of its long-term financial prospects. Any reduction in their estimated size is a concern for investors. The SEC's current reporting rules for oil and natural gas reserves were adopted more than 25 years ago, and the proposed changes are intended to reflect technological changes in how oil companies determine their proven reserves.

Board Adopts New Ethics and Independence Rule Concerning Communications with Audit Committees and an Amendment to its Existing Tax Services Rule

Washington, DC, April 22, 2008 – The PCAOB today voted to adopt Rule 3526, Communication with Audit Committees Concerning Independence, and an amendment to Rule 3523, Tax Services for Persons in Financial Reporting Oversight Roles.

The Board adopted Rule 3526 to enhance communication between audit committees and registered firms regarding the firm's independence. Rule 3526 will require a registered public accounting firm, before accepting an initial engagement pursuant to the standards of the PCAOB, to describe in writing to the audit committee all relationships between the firm or any of its affiliates and the issuer or persons in a financial reporting oversight role at the issuer that may reasonably be thought to bear on the firm's independence. Registered firms will also be required to discuss with the audit committee the potential effects of any such relationships on the firm’s independence. Rule 3526 will require firms to make a similar communication annually for continuing engagements. If approved by the Securities and Exchange Commission (SEC), Rule 3526 will supersede the Board's interim independence requirement, Independence Standards Board Standard No. 1, Independence Discussions with Audit Committees, and two related interpretations.

PCAOB Announces Roundtable Discussion Regarding Reliance Proposal

Washington, DC, May 14, 2008 – The Public Company Accounting Oversight Board will host a roundtable discussion on June 25, 2008 on a proposal regarding the circumstances in which it could rely fully on non-U.S. auditor oversight bodies in the context of inspections. Representatives of investors, registered accounting firms and foreign regulators will participate in the discussion.

SEC Investor Education Information Accompanying IRS Refund Checks to 3 Million Americans

Washington, D.C., May 2, 2008 — The Securities and Exchange Commission today announced that investors awaiting their refund checks from the Internal Revenue Service will simultaneously be receiving information about a new SEC phone-based resource that can help them learn more about various investing topics and avoid investment scams.

More than 3 million Americans will receive an SEC investor information card as an insert with IRS refund checks being mailed on May 3. The SEC's largest-ever direct mail outreach effort is intended to reach millions of Americans, particularly senior citizens, who do not have Internet access to online investor education information.

"By sending investor information in the same envelopes as IRS refund checks, the SEC is saving taxpayer money and using the combined services of the federal government to further its mission of educating all American investors," said Kristin Kaepplein, Director of the SEC's Office of Investor Education and Advocacy. "The sheer scope of our effort, the largest of its kind, demonstrates our commitment to helping all investors make informed decisions, including those without Internet access."

David Welch, whose case was being heard by the 4th U.S. Circuit Court of Appeals, was fired as chief financial officer of Cardinal Bankshares Corp. in October 2002 after he reported what he said were misclassifications in its financial reports.

A federal administrative law judge ruled in 2004 that Welch should be reinstated under the Sarbanes-Oxley Act, a law enacted in response to corporate scandals at Enron Corp., WorldCom Inc. and other companies. But Cardinal has refused to give Welch his job back. 

SEC Begins Small Business Costs and Benefits Study of Sarbanes-Oxley Act Section 404

Commission Proposes One-Year Extension of Final Compliance Requirements for Smaller Companies While Study Underway

Washington, D.C., Feb. 1, 2008 - The Securities and Exchange Commission today announced that its professional staff has commenced a cost-benefit study of an upcoming auditor attestation requirement for smaller companies under Section 404(b) of the Sarbanes-Oxley Act of 2002.

The study will collect and analyze extensive "real world" cost and benefit data from a broad array of companies currently complying with Section 404 under newly-issued guidance for companies and auditors. The new guidance for management and the new auditing standard were intended to reduce the compliance costs of Section 404 while strengthening its focus on material controls. In addition to assessing the Section 404 cost reductions resulting from the Commission's recent actions, the final report also will inform any decision to improve the efficiency and effectiveness of Section 404 implementation.

In connection with the study, the four-member Commission unanimously proposed on Jan. 31, 2008, the one-year extension of the Section 404(b) auditor attestation requirement for smaller companies that SEC Chairman Christopher Cox had previously announced in testimony before the House Small Business Committee in December 2007. The postponement would allow time for completion of the study. Under the proposed extension, the Section 404(b) requirements would apply to smaller public companies beginning with fiscal years ending on or after Dec. 15, 2009.

Board Proposes New Auditing Standard: Engagement Quality Review

Washington, DC, February 26, 2008 – The Public Company Accounting Oversight Board voted today to propose for public comment a new auditing standard on engagement quality review and a conforming amendment to the Board’s interim quality control requirements. This proposed standard would supersede the Board’s interim quality control standard, SECPS Requirements of Membership § 1000.08(f).

Section 103 of the Sarbanes-Oxley Act of 2002 directs the Board to include in its auditing standards a requirement that each registered public accounting firm "provide a concurring or second partner review and approval of [each] audit report (and other related information), and concurring approval in its issuance." The proposed standard, which would apply to all engagements performed in accordance with the standards of the PCAOB, is risk-based and designed to increase the likelihood that engagement deficiencies will be identified and corrected prior to the issuance of the auditor's report. The proposed standard provides a firmer framework for an engagement quality reviewer to objectively evaluate the significant judgments made by the engagement team and the conclusions reached in forming the overall conclusion on the engagement and in preparing the engagement report.

Florham Park, N.J. (May 1, 2008)
By WebCPA staff

The total average cost of Sarbanes-Oxley Section 404 compliance reached $1.7 million last year, according to a newly released survey.

Financial Executives International polled 185 companies to gauge their experiences with Section 404 internal control audit compliance in fiscal 2007. The organization found that total audit fees for U.S. accelerated filers averaged $3.6 million, a slight increase of 1.8 percent from the previous year.

Costs of SOX 404 compliance have been on the decline, according to the report. "The internal costs are decreasing," said Christine DiFabio, vice president of technical activities for FEI. "Companies are not outsourcing as much now and they're getting more efficient." She added that companies are also making better use of judgment and making their internal control audits more risk-based, which adds to efficiency.

SEC Charges Trio of Fort Lauderdale-Area Doctors With Insider Trading

Washington, D.C., May 12, 2008 — The Securities and Exchange Commission today charged three Fort Lauderdale-area medical doctors with illegal insider trading, alleging that they reaped a combined total of more than a half-million dollars in profits from their illicit scheme.

The SEC's complaint, filed in U.S. District Court for the Southern District of Florida, charges Dr. Zachariah P. Zachariah (Zachariah) and his brother Dr. Mammen P. Zachariah in regard to illegal trading in the shares of two unrelated companies. The SEC alleges that Zachariah, a board member at pharmaceutical company IVAX Corporation, began illegally trading in IVAX securities only minutes after he learned that IVAX might be acquired. Zachariah also tipped his brother, who then purchased IVAX shares.

The SEC's complaint further alleges that the two brothers and Zachariah's friend Dr. Sheldon Nassberg also engaged in illegal insider trading in the stock of an unrelated company, Correctional Services Corporation, around the same time as the illegal IVAX trading.