A Progress Report: IFRS-U.S. GAAP Convergence and Its Curriculum Impact

ABSTRACT This paper offers a progress report on the convergence of IFRS and U.S. GAAP and its curriculum impact in higher education. In an earlier (2009) published paper, the authors explored faculty perceptions regarding the feasibility of global standards, difficulties in training for teaching IFRS, the practicality of the roadmap for the convergence, and benefits gained. Information on accounting chairs '/deans' perceptions regarding this convergence was obtained from thirty-seven top ranked AACSB-accredited accounting programs in the U.S. to validate earlier findings. In this paper, the current status of the convergence, reports of studies from around the world, and other research performed on curriculum impact are presented. Keywords: International financial reporting standards (IFRS), Curriculum impact of adoption of IFRS, Human capital impact on accounting profession, Global capitalization of markets, Harmonization of accounting standards INTRODUCTION In a 1991 article, R.K. Goeltz opined that harmonization of international accounting standards was impractical and not necessarily proven to be valuable. Within twenty years, the world has come to a point where more than 100 countries have adopted IFRS and more, including the United States, will most likely do so before the end of the next decade. The main benefits expected from having one set of accounting standards are better comparability of financial statements of companies from different nation states, facilitation of global trade and world capital markets, and a lower cost of capital (Bolt-Lee & Smith, 2009). It has also been argued that the principles-based approach followed by IFRS may improve quality of financial reporting as earnings management may be reduced. However, others have disputed this claim and found no such significant improvement in earnings quality experienced by countries adopting IFRS (Jeanjean & Stolowy, 2008). Among the negative effects, researchers point out the cost of transitioning to IFRS to be the major impact. In countries with established high quality and stringent accounting standards, such as the U.S., financial reporting improvements from adopting IFRS are anticipated to be minor as a whole (Hail, Leuz, & Wysocki, 2009). These authors even suggest creation of a competing U.S. GAAP-based set of global standards as an alternative to IFRS. Regardless of the aforementioned varying opinions and study results, convergence of U.S. GAAP with IFRS is now more of a reality rather than a simple conjecture or a forum for discussion. With shifts in political power and leadership changes at the Securities and Exchange Commission in 2009, there have been some twists and turns and delays in the proposed roadmap for transitioning into IFRS. Originally, the SECs roadmap set forth milestones that could have led to the required use of IFRS by U.S. issuers in 2014 while encouraging early adoption by 201 1 (SEC, 2008). However, after listening to much debate over the positive and negative effects and the uncertainty of benefits, the newly appointed SEC director has decided to delay the transition to 2016 at the earliest. Nonetheless, the accounting educators, the major accounting firms, the American Institute for CPAs (AICPA), and the accounting textbook publishers have recognized the urgent need for preparing for this shift. For example, the AICPA Board of Examiners have decided to test candidates for the national CPA examination on IFRS topics in three of the four sections of the exam beginning as early as 201 1 (AICPA, 2010). The Board wants candidates to be as proficient in IFRS topics as U.S. GAAP and GAAS (Generally Accepted Auditing Standards) regardless of when the SEC determines the effective date for adoption. In addition, the public accounting firms are expecting the new hires to be aware of the convergence process and the differences in IFRS and GAAP. These events have undoubtedly sped up the process for accounting educators to be trained in IFRS so that adequate coverage in accounting programs is possible. …