Small Firm Perspective: Meeting Clients' Needs in the IFRS Environment
James C. Metzler, CPA, AICPA Vice President | August 2008
If you are a small practitioner, it's very much in your interest to know about International Financial Reporting Standards (IFRS). For decades, changes in the global marketplace—and particularly in international accounting standards—appeared to have little direct impact on CPAs in smaller firms. That's no longer the case. The United States is heading toward convergence with international standards. That makes sense because even the smallest companies are increasingly doing business in the global marketplace. According to the U.S. Small Business Administration, exports by U.S. small businesses soared fourfold – to $400 billion – between 1992 and 2007. And it's expected that half of U.S. small businesses will be involved in international trade in the next 10 years.
These developments do not apply exclusively to public companies and large businesses because changes in financial reporting have an impact on clients across the spectrum. Your clients and potential clients may not be aware yet of the shift toward international standards and the effects of reporting their financial results using IRFS—and that's exactly why now is the time to develop expertise in this area. There are many opportunities today for practitioners who are “fluent” in the language of IFRS to assist companies that choose to adopt IFRS or who see potential business opportunities in this global economy.
CPAs who understand IFRS will be in a unique position to share their knowledge. IFRS knowledge is already in demand from businesses of all sizes and firms are finding themselves assisting companies that were not their clients previously. CPAs with IFRS expertise are viewed as a valuable asset and are being called upon to familiarize, educate and evaluate the effects of a conversion, and oftentimes lead clients' efforts in adapting these standards in their businesses.
Small firm practitioners can help their clients and network of contacts with activities:
- Smaller firms that are members of international CPA associations will be called upon more frequently by their overseas members. U.S. firm members will be called upon to assist with the smaller foreign subsidiaries and divisions located in the U.S. that are now able to file with the Securities and Exchange Commission using IFRS. In addition, international firm members will more readily call upon smaller firms fluent in IFRS to help them with engagements outside the U.S. in their home countries.
- With the current position of the U.S. dollar, private companies of all sizes are actively being approached by foreign acquirers. They are asking these U.S. targets to prepare their financial statements using IFRS so they can better compare the company's performance with the performance of operations in their own countries. CPA firms are being called upon to perform the actual conversions of financial statements from U.S. GAAP to IFRS and for project management of the conversion process.
- High-level briefings of company stakeholders, audit committees, credit grantors and other financial statement users on such topics as where IFRS is headed, the significant differences and the strategic business considerations that need to be considered. Other audiences include business organizations, trade associations and civic business groups.
- Formal education programs for company stakeholders, audit committees, credit granters and other financial statement users, including local bankers, bonding companies, insurance professionals, investment professionals and any local constituency that uses financial statements or advises businesses and their owners.
- In-depth consulting on making the optimal choice for companies deciding between U.S. GAAP vs. IFRS reporting.
- Assisting businesses and credit grantors in making key decisions by explanation and interpretation of financial statements received that are prepared based on IFRS.
Why small firms? First and foremost, it's easy to envision that IFRS will one day be adopted by private companies as the globalization of business and convergence of standards continue at today's rapid pace. Secondly, there are more than 17,000 public companies, the majority of which are small public companies spread throughout the U.S. along with many divisions that are separate entities. All will need to consider IFRS.
Now is the time for small firm practitioners to position themselves and their firms as the leading IFRS experts in their local markets. When they do, you will be ready to speak the language of IFRS and assist your clients in achieving their goals.
About the Author
James C. Metzler, CPA, AICPA Vice President
