A new international study, commissioned by the Board of the International Federation of Accountants (IFAC), identifies the challenges to adopting and implementing International Financial Reporting Standards (IFRSs) and International Standards on Auditing (ISAs) and recommends actions to be taken by all those in the financial reporting supply chain to achieve convergence to international standards. Entitled Challenges and Successes in Implementing International Standards: Achieving Convergence to IFRSs and ISAs, the study also provides examples of successful adoption and implementation to serve as models for other countries.
The study was prepared by Peter Wong, a former member of the IFAC Board and former president of the Hong Kong Institute of Certified Public Accountants.
Mr. Wong, supported by senior IFAC staff, conducted interviews and focus group meetings with international regulators, standards setters, representatives of IFAC member bodies and regional accountancy organizations, as well as preparers, auditors, and users of financial statements. The results of those discussions resulted in the identification of six primary challenges to international convergence:
The need to develop standards that are capable of translation and to establish processes that facilitate high quality translations of the standard in order to more effectively accommodate the needs of non-native English speakers;
– Complexity and structure of the standards;
– 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 report also addresses how some of these challenges are being successfully addressed by IFAC member bodies, national standard setters, and other entities.
“There is no question that globally consistent and uniform financial systems provide cost-efficiencies to business and greater safeguards to the public,” states Mr. Wong. “It is for this reason that we need to focus on creating globally consistent standards. As the study points out, achieving this involves a concerted effort by all those involved in the financial reporting process.”
IFAC President René Ricol added: “An important element of the study was on identifying challenges faced by specific sectors of the profession, particularly small- and medium-sized entities and accounting firms and those working in developing
nations, in implementing the standards. We are now better positioned to address these issues.”
The study concludes with a number of “Proposals for Actions by Stakeholders.” Governments, regulators, international and national standard setters, regional and national professional accountancy organizations, educational institutions, analysts, and investors as well as auditors and reporting entities are strongly urged to consider these proposals.
The study will provide input to a Financial Stability Forum roundtable on the implementation of international accounting and auditing standards to be held in October.
To download the study, go to IFAC's website. www.ifac.org. Print copies are available on request by contacting the Publications Department at +1-212-286-9344 extension 2103.