IS THE UNITED STATES READY TO WORK WITH THE GLOBAL FINANCIAL REPORTING LANGUAGE?
____________________________________ A Thesis Presented to The Honors Tutorial College Ohio University _______________________________________ In Partial Fulfillment of the Requirements for Graduation from the Honors Tutorial College with the degree of Bachelor of Business Administration ______________________________________
by Lisa C. Miller June 2012
This thesis has been approved by
The Honors Tutorial College and the College of Business
__________________________
Dr. Christine Yost Professor, Accountancy Thesis Advisor
___________________________
Dr. Raymond Frost Director of Studies Business Administration
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Jeremy Webster Dean, Honors Tutorial College
PART I: INTRODUCTION
Preface: A Reflection on My Research Process This thesis is the culmination of several years working with International Financial Reporting Standards (IFRS) in tutorials and accounting classes. I first developed an interest in international business when I was still in high school, and took several trips abroad to Europe. The interest in international business and cultures has since evolved into my thesis topic on IFRS as I have explored my career options here at Ohio University. As a requirement for my first tutorial, we were asked to explore a topic of interest in relation to our specialization within the study of business. Seeking to find a connection between international business and my newly declared major, Accounting, in 2009 I stumbled across the movement for a consistent global set of financial reporting standards. Although I wrote only an exploratory literature review on IFRS regulatory environments for this first class, the subject had already sparked my interest for future tutorials. In developing a paper for my next tutorial in my sophomore year, I created a section on areas for further exploration. After extensive research into secondary sources, IFRS education in the United States entered into my research scope along with several other IFRS topics. After exploring options with my faculty advisor, Dr. Christine Yost, in my first individual tutorial that spring, we found that IFRS education and training was a mutual interest and decided to pursue the topic for submission to a conference.
One of the most unique aspects about IFRS as an accounting topic is that it is a rapidly evolving subject matter. In less than a decade in practice, it has become the foremost hope for a uniform global financial reporting method. Likewise, the educational aspect of the topic is constantly evolving and increasing in importance with the standards themselves. In order to address the nature of the standards, we decided to conduct a survey on students and professionals in the spring of my sophomore year. This study developed into a paper and a presentation at the Intellectbase International Consortium in December 2010, where I was able to interact with and receive feedback from numerous academics from around the world. As I approached my senior year, I sought to expand and improve my study in order to create my thesis. After evaluating my prior research with my advisor, I found that in order to create a truly holistic view on the topic, I would need to alter my strategy to include a wider array of respondents. To create this perspective, I decided to pursue a more extensive number of professional participants as well as include a variety of faculty. Also, in deference to the changes since the previous study, I improved and conducted all primary research for the study again during my senior year. Redoing the research allowed me to build off my previous knowledge as well as incorporate truly relevant primary data to create my thesis. Through my explorations and research in preparing for my thesis, I developed my professional network, my writing and communication skills, and my overall research skills. The following work is the evolution of two years of exploration and research integrated with content from my accounting classes. I am truly grateful to Dr.
Yost for her dedication, mentorship, and friendship in the past two years of working with IFRS. The Honors Tutorial College research process has helped me to develop academically, professionally, and personally into a young professional who is able to not only complete a sustained research work, but also confidently enter graduate school and eventually the work force. Introduction Accounting is considered to be the language of business, communicating a company’s performance, growth, and investments through its financial statements to its shareholders, competitors, and management team. The global financial world continues to shrink as both technology and international trade increase the flow of capital between countries’ economies. As business becomes increasingly global, accountants around the world are faced with the need to be able to communicate, or at least understand, the business languages of their counterparts. The financial world, however, currently stands at a crossroads as the global community strides toward financial comparability and consistency across nations, while the United States continues to function with its unique set of accounting standards. The United States financial environment, currently governed by the Generally Accepted Accounting Principles (GAAP), has faced increasing pressure for comparability, convergence, and conversion to the International Financial Reporting Standards (IFRS). IFRS, the international counterpart to US GAAP, has grown exponentially in its influence since its use was mandated in the European Union in 2005 (Mintz 2010). As of 2011, the international standards are used in over 120
countries worldwide by more than 20,000 companies (IFRS Foundation 2011; James 2011). The United States has sought to address the rise of the international standards through convergence efforts with the international community, gradually moving the standards closer together through the issuance of similar standards in both GAAP and IFRS. With the continuance of these convergence efforts, the 2007 elimination of IFRS-GAAP reconciliation requirements in the United States, and the January 2011 introduction of IFRS material on the CPA exam, IFRS has become necessary knowledge for accounting students and professionals in the United States (Kinkela, Harris and Malindredos 2010; James and Blaszczynski 2011; James 2011). Accounting education and standards setting tend toward a more reactive approach as exemplified by the introduction of Sarbanes-Oxley requirements earlier in the decade as well as the decision to approve 150-hour education requirement for the Certified Public Accountant (CPA) exam (Miller and Bahnson 2010; James 2011). As the Securities and Exchange Commission (SEC) continues to defer an official decision on IFRS conversion in the United State in favor of extended convergence efforts, university educators have the opportunity to take a proactive approach in preparing their students for the global professional world. The extensive global influence of IFRS has left many universities aware of the need to address the international standards in their classrooms. Yet, universities also struggle to prepare students with this knowledge given the already full curriculum
(Munter and Reckers 2010; Cherubini, et al. 2011; KPMG LLP and AAA 2011). The depth of faculty experience in this relatively new and constantly evolving subject has also presented challenges to many universities that are interested in creating learning opportunities in this area for their students. Universities have also cited lack of materials and budgets as issues impeding the expansion of IFRS coverage in their curriculum (Munter and Reckers 2010; KPMG LLP and AAA 2011). Although IFRS has become more prevalent in university-level curriculum in the past few years, the variation in coverage varies from institution to institution, ranging from the occasional mention of the existence of IFRS to an intensive class on the differences between IFRS and GAAP. The overall focus of this study was the investigation of the current state of IFRS education and training in the United States as well as a comparison of the current and future needs in the industry. The study sought to establish that universities needed to increase their IFRS coverage in order to meet industry demands. Mentioned as an item in need of further research in several IFRS-related articles, this information provides valuable insights to academia, students, and financial professionals for their academic planning. Through research and interviews with professionals and professors in finance and accounting, the study develops a majority opinion on IFRS education and training in the United States. The research also includes analysis of the desire of students and professionals to advance their knowledge in the subject area, and industry opinions on what IFRS knowledge is needed for different levels of financial careers and
responsibilities. The study overall explores the implications of IFRS on the accounting education programs as a whole and what change is needed to address the growing influence of the international standards on the United States financial community. Review of Previous Literature IFRS as a whole has been the subject of extensive research and commentary in the United States. Current research on the demand for IFRS education in the United States, however, has not heavily explored comparable perspectives between the different players in the accounting industry. Also, due to the highly evolutionary nature of IFRS, regular studies are required to make an up-to-date analysis of the subject matter. Studies conducted as recently as 2011, depending on the area of IFRS, could be outdated either from changes in the standards themselves or from recent decisions made by regulators. The following literature review, accordingly, places an emphasis on recent literature based on the materials covered from that area of IFRS. Since its debut just over a decade ago, IFRS has quickly gained ground worldwide. Over 120 countries now utilize IFRS as their accounting standards (IFRS Foundation 2011; James 2011). The standards, published by the International Accounting Standards Board (IASB), take a principles-based approach to financial reporting. A different approach both with its technical rules and overall mindset than the rules-based US GAAP, IFRS represents an educational challenge to those trained in the American standards (IFRS Foundation 2011). Additionally, as of 2012, the United States is one of few major economic influencers that neither uses IFRS nor has set plans to use it in the near future.
The idea of global cooperation on accounting standards is hardly a new idea for the United States. The early predecessor of the IASB, the International Accounting Standard Board Committee (IASC), was founded in 1973 with members including the United States, Australia, Mexico, Japan and several European countries. Interest, however, in a global set of accounting standards in the United States was not officially addressed by FASB until the late 1980s and early 1990s. The 1990s presented several committees including G4+1 to pursue this stronger interest in a global standard body. The creation of the standard setting body of IFRS, IASB, in 2001 was derived from the initiatives of G4+1 and the other aforementioned committees (Needles 2010). There are numerous differences between US GAAP and IFRS that affect compatibility of the two sets of standards. These differences begin with the two standard sets representing two styles of accountings, principles-based accounting and rules-based accounting. IFRS is principles-based accounting, which means it is about 15 percent the size of US GAAP and is centered on broader statements of the principles and objectives to be followed. US GAAP, on the other hand, is very detailoriented with over 17,000 pages of rules and requirements (Needles 2010). Both styles have positives and negatives used to debate which style is the stronger approach, but there is no doubt that the difference in mindset, professional judgment, and guidance between the two standards is great. One of the central goals of the IASB is to convince the United States, a major global economic power, to convert to IFRS. Accordingly, the IASB and FASB are currently working on projects to evolve both sets of standards into more high quality
standards by reworking sections of rules and principles in a process called “convergence.” These projects are compiled around the major differences between the standards and are set forth in a “road map” to allow for a timeline of completion. This so-called “road map” for US GAAP and IFRS convergence was released by the SEC and is being facilitated by both the FASB and the IASB (Barry and Kaplan 2010). Currently, the United States is committed to convergence projects with the IASB, but a decision on conversion to IFRS is yet to be made. There are often misconceptions about these two different approaches to bringing IFRS to the United States. Convergence is the process of gradually moving the two standards closer to each other by releasing similar high quality statements on areas of major differences. Convergence releases still allow for small differences between the standards released as well as no requirement to accept the other board’s revision proposals (Deloitte, 2010). A conversion decision would mean complete commitment to IFRS use in the United States. The decision would also mean the standards being used in full by at least all public companies that file with the SEC in their current form. A conversion to IFRS would create a shift in control over financial reporting standards from the FASB to the international body, the IASB. The convergence projects between FASB and IASB have been formalized through several joint agreements throughout the earlier part of this decade. The first of these agreements was the Norwalk Agreement, also known as the Memorandum of Understanding, in 2002. This agreement marked the formal agreement between the two organizations to converge US GAAP and IFRS. The Memorandum highlights
several key differences between the two standard sets that would be central projects for their work schedule. It was established with two main objectives: to make existing financial reporting standards fully compatible as soon as possible, and to coordinate future work in order to main compatibility into the future. Dedication to the initiatives and projects in the agreement was reaffirmed by both groups in 2006 and then again in late 2009 (Needles 2010). The main projects of the Memorandum of Understanding are defined as financial instruments, business consolidations, derecognition, fair value measurement, revenue recognition, leases, financial instruments, and financial statement presentation. The Memorandum of Understanding also includes several other smaller projects. These projects highlight the overall areas of major differences that the IASB and FASB wish to eliminate or lessen in order to move the two sets of standards closer and create the possibility for a smoother transition by the United States to IFRS. Any decision on IFRS in the United States will be based on several factors in order to determine both the suitability of IFRS for the American financial environment and the capacity of the United States to take on the change to the new set of standards. Specifically, six factors are addressed within the official SEC work plan. These six factors include evaluating investor education and understanding as well as analyzing human capital readiness to sufficiently execute IFRS for American businesses. The education of our financial professionals is, therefore, an important step toward the possibility of a uniform set of global financial reporting standards. This evaluation would also mean that if the SEC views the education levels provided at
both universities and at the professional level to be insufficient, IFRS will not be brought to the United States. The “wait and see” mindset currently being experienced by many universities and firms could be an obstacle to making a further decision (Patrisso 2010). Although other factors including standard sufficiency, competency and independence will also be considered, a lack of movement in the education sector could considerably hamper the decision process. It remains to be seen which group, academia or regulators, will move first or if there will be a move at all to push the United States towards IFRS. Future Conversion to IFRS The movement to develop IFRS knowledge in the United States draws the majority of its support from a few overall areas. The movement in the United States towards IFRS is led by companies with a strong international presence or those that rely heavily on international capital market participation. For example, the “Big Four” accounting firms are some of the biggest sources and supporters for IFRS- related topics due to their expansive global presence and functions. Many of the government agencies such as FASB are supporters of the movement to IFRS as a global set of standards. It was stated in a winter 2010 SEC release that IFRS “is best positioned to become the global set of [financial reporting] standards,” (Patrisso 2010). With strong support from big business as well as government agencies, progress towards IFRS has moved ahead with a strong backing. Overall, the arguments for IFRS knowledge are derived from a need for financial statement comparability globally.
With the recent recession striking hard on companies in the United States, encouraging the flow of capital globally for American companies and investors has become a key concern. To maintain a strong capital flow for both groups, easy flow of capital in and out of other countries to supplement the American financial environment becomes increasingly crucial. Investors are unlikely to invest in companies with unfamiliar forms of financial statements. There would also be similar issues when the financials of a potential investment are not comparable with the bulk of a company’s or individual’s investments. Both of these situations would lead to a less global flow of capital investment dollars. With the number of IFRS countries increasing, companies filing in US GAAP are becoming a smaller force on the international financial markets (Patrisso 2010). For investors looking to find the best financial opportunities, a familiarity with IFRS becomes necessary in order to connect to investment opportunities in growing and thriving economies such as Brazil, which utilizes the international standards. This analysis would likewise affect American companies hoping for investments for international investors. These investors would be more likely to work with comparable and familiar financials from countries utilizing IFRS as opposed to making adjustments to numbers in US GAAP financials. One source even ventures to say that New York City could lose its place as a world financial center in the future. The source believes that the companies will instead want to move their headquarters to a more IFRS knowledgeable location in order to increase the ease in compiling and filing financial statements for the overall company (Needles 2010).
Additionally, the SEC removed the barrier requiring foreign companies to reconcile their IFRS standards to US GAAP to be eligible to participate in the American financial markets in 2007 (James and Blaszczynski 2010; Paul and Burks 2010; James 2011). Foreign filers are no longer required to provide information in US GAAP along with their IFRS financial statements. To participate in the United States’ financial markets, a United States accountant must review and sign off on the company’s financials. Companies that file in IFRS have financial statements that use a different method of presentation from US GAAP financial statements, which follow different requirements for components required. In order for these companies to be able to participate fully in the United States markets, American accountants must be knowledgeable enough about IFRS to review the statements and determine their validity in the market (Stephens 2010). As IFRS continues to expand its influence globally and companies continue to complete conversion from their local GAAP, the number of companies that file in IFRS and the American markets will continue to expand. Another driver for IFRS knowledge in the United States lies with the global interconnectivity of businesses. Unlike the United States, which allows foreign companies to file in IFRS, many foreign subsidiaries are required to file in IFRS in their location country even though their parent company files in US GAAP. These subsidiaries, therefore, are required to create financial statements in IFRS for their location country as well as in US GAAP for the parent company financial statements. This excessive filing creates added cost and extended knowledge and training as well
as decreases the overall efficiency of the financial portion of the firm. Foreign parent companies also require the subsidiaries to compile information in IFRS as well (PricewaterhouseCoopers 2009). For any of these components, the financial professionals and investors involved must be knowledgeable about IFRS as well as US GAAP to execute their financials. As mentioned briefly above, an American accountant working at the subsidiary company of an international parent would likewise need to be able to create the subsidiary financials in IFRS in order to comply with the accounting policies of the international company’s base country. The increasingly global nature of business, therefore, necessitates the development of IFRS knowledge in the United States accounting profession. Another argument for the conversion of American accounting to IFRS is that internal efficiency could be greatly improved in the rising number of companies with international functions and employee bases. Similar accounting systems across borders would allow financial professionals from around the globe to work in the United States and vice versa without additional training and education. Supporters argue that this will allow for a strong, fluid market for employment and development opportunities for American employees and companies. Also, supporters add that the same principles would apply for internal training and programming for companies. Global companies would be able to develop and share IT systems and training programs amongst internal subsidiaries and beneficiaries as well as extending them to other companies in other countries (Needles 2010). They contend that IFRS presents
the opportunity for global companies based in the United States to lessen costs through the aforementioned centralization and streamlining of processes. According to the literature available on IFRS influence on financial markets, being informed on the progress of IFRS in the American financial community seems to be an important asset to future success (Cherubini, et al. 2011; Pounder 2011). Although companies currently release updates on current activities within the financial reporting world, it is difficult to find a summary of the changes that is readable for anyone not completely up to date on the accounting world. Many of the professionals and students in the accounting field as well as investors remain uneducated on more than the very basics on the process that is taking place in global financial reporting. The implications of IFRS on the United States will also extend beyond the financial reporting community to a mostly unaware population because the use of IFRS instead of US GAAP would affect tax policy, mergers, acquisitions, financial planning, systems requirements and compensation structures (PricewaterhouseCoopers 2009). Information releases also tend to come from “Big 4” accounting firms, and therefore, include a bias toward their opinions and companies, or from the IASB website, which is not a commonly frequented website by Americans who are not directly involved in the process. The educational exposure seems to be lagging for financial professionals, investors, and students. It would appear that regardless of the decision made by the SEC, IFRS has become a force in the financial reporting community and will continue to affect
financial reporters and investors (Chasan 2010). The global influence of IFRS has brought it to American financial markets through foreign companies, subsidiaries in the United States, convergence efforts, and capital investments. American accountants must now face the prospect learning two sets of standards in order to remain globally competitive and relevant. The question remains as to how the accounting profession in the United States will seek to address IFRS in the United States both currently and moving into the future. Changes in Accounting Education Universities have been working to internationalize their curriculum since the introduction of the “worldwide dimension” was added to American Assembly of Collegiate Schools of Business (AACSB) in 1974 (Zhu, et al. 2011).The integration of IFRS into the American curriculum, however, did not begin until more recently when it rose in influence in the American financial markets. With the rise of IFRS taking place quickly, coming to power in the last ten years, most accounting curriculums have been struggling to keep up and to develop the appropriate resources to facilitate IFRS in the classroom. The accounting profession also tends towards a more reactive approach to education, which has led to a slow introduction and incorporation of IFRS into the accounting curriculum. Past subject matters exhibiting this type of reactive approach include both the increase in required hours for CPA licensing to 150 semester hours (or 225 quarter hours) and the introduction of SOX 404 auditing requirements (Miller
and Bahnson 2010; James 2011). The increased hours were often incorporated last minute into curriculum, or added on with growing pains to university curriculum so that students were able to meet the requirements. This same trend has been apparent in the introduction of IFRS curriculum, especially with the uncertainty created by a constant change and push back on major dates associated with IFRS projects (KPMG LLP and AAA 2011). Universities are choosing to wait on more extensive curriculum coverage until an official decision has been made by the SEC regarding the position the IFRS will take officially in the United States financial reporting environment. This approach, however, also means that IFRS in respect to the global finanical reporting environment is being comprehensively addressed in American classrooms. An adjusment to a more IFRS-focused curriculum would also require a change in teaching methodology. The previous chair of the FASB, Robert Herz, indicated in an article that “accounting education will need to be changed to focus less upon rules and more upon accounting principles and topics,” (James and Blaszczynski, 2011). For American students to master IFRS, they must learn to approach financial reporting in a more holistic and analytical way in order to be able to apply principles-based accounting rules. This change in focus, which mirrors the overall difference in approaches between US GAAP and IFRS, is necessary for true integration of IFRS principles into United States classrooms.
IFRS is unique from US GAAP in its approach to accounting within financial statements and should be accordingly taught differently. IFRS is most frequently taught in the style of addressing the major differences between the two sets of standards through comparison to US GAAP (Larson and Street, 2011). This teaching method, however, can lead students to struggle with practical application of IFRS when they try to utilize the international standards with a rules-based mindset. Faculty now face evaluating the most effective method to teach IFRS to students in the United States in conjunction with US GAAP curriculum. Educational Demand Prior literature including studies and surveys of financial professionals present the importance of IFRS curriculum for the American financial markets (Cherubini, et al. 2011; Pounder 2011). The consensus of these professionals is that IFRS needs to be an area of attention in financial education. Most financial professionals believe that people in the field should have at least a basic working knowledge of IFRS. For example, in a Financial Executive Learning Survey of over 750 respondents, IFRS/US GAAP convergence was cited as the top learning priority for financial executives (Pounder, 2011). Additionally, in the annual survey, IFRS in the Accounting Curriculum survey, conducted by KPMG LLP and the American Accounting Association (2011), 85 percent of the 638 respondents say it is important for faculty to teach IFRS in United States classrooms.
When the AICPA surveyed over 1,200 professionals in fall of 2011, 78 percent responded that at least a basic knowledge of IFRS was needed in the profession, especially in public companies and foreign-owned companies. In the same survey, 68 percent indicated that educating CPAs and financial staff would be one of the largest challenges associated with IFRS, followed closely by a 64 percent response on educating clients on IFRS (AICPA, 2011). The overall consensus at the professional level was IFRS education in the United States should be an important consideration both at the university level and the professional training level in order to develop a base knowledge in the industry. Many professionals also believe IFRS to be subject matter that should be included in their interview process for new hires (Munter and Reckers 2010; Cherubini, et al. 2011; Stokes, Isaacson and Clopper 2011; James 2011). Many firms such as PricewaterhouseCoopers have been including IFRS in their interview content since 2009 (James, 2011). Students have struggled to prepare through their education to meet this inquiry, often having to have independently researched to be informed on the subject. As cited in the article The Rush to IFRS: Practice vs. Academe, “students were annoyed that firms expected them to have more knowledge than currently available,” (Stokes, Issacson and Clopper, 2011). The graduates who do enter the workforce with IFRS knowledge, however, will be able to have a competitive advantage against their contemporaries. Additionally, students who wish to work internationally or domestically for an international firm will have to learn IFRS in order to become an effective contributor
to their company’s financial department (James, 2011). With the incorporation of IFRS topics into job and internship interviews, students now face a new level of required knowledge in order to gain entry into the field of accounting, and they need curriculum coverage at universities to address that demand. IFRS was introduced on the CPA certification exam as of January 2011. The introduction signified the American Institute of Certified Public Accountants (AICPA)’s acknowledgement of IFRS as a topic of significance (AICPA, 2011). It also created a minimum level of knowledge on IFRS that is now required for entry into the field through successful completion of the CPA exam. As part of the financial reporting section, students must be able to identify and understand the differences between financial statements prepared using US GAAP and IFRS. Candidates taking the CPA exam must also be aware of the process by which the SEC, FASB, and IASB set accounting standards and what their roles are within the accounting standards community. Finally, the process of first-time IFRS adoption will also be included in this section of the CPA exam. Several components related to IFRS will be tested as part of the exam and will necessitate IFRS knowledge for any candidate wishing to excel on the test. According to the AAA and KPMG LLP (2011) survey, 59 percent of faculty respondents believe that the CPA exam will not only include IFRS, but will also significantly test the subject matter by 2014. Although it remains a small portion of the exam currently, the content has created ramifications through the undergraduate and graduate level accounting curriculum, and IFRS will likely continue to increase in coverage on the exam.
Previous Studies Previous studies have also found that the introduction of IFRS in the classroom has support from faculty at United States universities. Most faculty members have indicated at least a basic incorporation of IFRS into their curriculum (KPMG LLP and AAA 2011; Weiss 2011). The incorporation of IFRS, however, is widely variable from university to university. Incorporation ranges from a required independent IFRS class to the occasional classroom mention in the curriculum. There is no set standard across accounting curricula in the United States, as IFRS is both new and constantly evolving in relation to global accounting. In the KPMG LLP and AAA survey (2011), only four in ten faculty respondents cited significant IFRS incorporation into their curriculum. Many programs are, however, working to develop IFRS curriculum and gradually integrate the materials into their current classes. A few schools have even sought to create an independent IFRS class for their students (Weiss, 2011). The practical introduction of IFRS curriculum, however, creates numerous challenges for faculty and accounting department chairs. With the current state of IFRS, both US GAAP and IFRS topics have to be taught and addressed in classrooms. Curriculum constraints and pressure from their departments have been indicated as barriers of IFRS education as well (Munter and Reckers 2010; Cherubini, et al. 2011). Faculty have cited the demanding nature of US GAAP education as a reason for not incorporating more IFRS material into their curriculum. According to the IFRS in the Accounting Curricula survey, over one-third of respondents claim that their departments have not found a faculty member qualified to teach IFRS materials
substantially as well as over 56 percent state that their administrators do not have an understanding on what changes will need to be made to the curriculum moving forward. This analysis is echoed in the Munter and Reckers (2010) article, which found that making room in the curriculum was listed as either challenging or very challenging by 70 percent of the respondents of the study included in their paper. In another study, many respondents also indicated that IFRS could not be taught in their introductory accounting curriculum without removing another topic (Cherbuini, et al. 2011). As academia begins to integrate IFRS, challenges have surfaced from adding another entire set of standards to an already full accounting curriculum. Faculty also cite an overall struggle for resources to teach themselves and their students (KPMG LLP and AAA 2011; Stokes, Isaacson and Clopper 2011). Munter and Reckers (2010) also have a similar finding in their paper, where 59 percent of survey respondents indicated developing curricular materials as either challenging or very challenging for IFRS curriculum. Another study, focused specifically on introductory accounting, found that 56 percent of respondents believed that principles level IFRS materials were not adequate to teach the subject matter. These faculty also stated that they would be more likely to spend more time on the international standards should the quality of the materials improve (Cherubini, et al. 2011). With the highly evolving nature and recent rise of IFRS, faculty have generally been unable to properly develop their own knowledge extensively or have chosen to wait for a more certain decision on IFRS in the United States before stepping outside their comfort zone.
In the 2011 survey conducted by KPMG LLP and AAA, only 25 percent of the faculty respondents stated that they had reviewed and evaluated IFRS resources. Additionally, almost the entire group of responding faculty indicated that they have no practical experience in applying IFRS (KPMG LLP and AAA 2011). The study conducted by Stokes, Isaacson, and Clopper (2011) yielded similar results, finding that a 2011 Advanced Accounting textbook, which had over 1,000 pages, included only 16 mentions of IFRS, including both the preface and footnotes. They also found that there was little reinforcement on IFRS topics within both the advanced accounting and intermediate accounting books they evaluated, which lacked of questions and exercises on the international standards. Recently, there has been a slight increase in materials, but they come from professional firms such as the “Big 4” accounting firms and other large accounting practices. The IFRS foundation, the body behind the IASB, also provides some resources (Larson and Street, 2011). Faculty, however, are forced to go looking for these resources, which are embedded into firm websites and IFRS resources in order to find the tools for the classrooms. The “Big 4” accounting firms have lended their efforts to the introduction of IFRS education at the university level through these resources, and they continue to be a leading driver of IFRS coverage at universities. All of these firms, as well as numerous regional firms, have specifically developed IFRS portions of their websites for education, provided their training materials to faculty to pass on to their students, developed case studies and otherwise supplemented university level education (James 2011; Weiss 2011). Many firms have
also issued grants to universities in order to facilitate the change as early as the 2000s. Schools such as Wake Forest University and the Ohio State University have utilized these grants to develop content and IFRS classes for their curriculum and academia through these partnerships (Weiss, 2011). As more materials and professional content has become available, IFRS knowledge has continued to increase. These resources, however, still remain underutilized in accounting programs in the United States as a whole. Overall, the state of IFRS education in the United States remains variable and often lagging on industry demand. Challenges such as curriculum constraints and availability of IFRS resources continue to hamper the extensive introduction of IFRS in American accounting programs. Progress bring IFRS to students in the United States is gradually being made, especially with the encouragement and support of the larger accounting firms. The overall consensus, however, seems to be that there still needs to be more progress in order to effectively integrate IFRS into universities (AICPA 2011). Discussion Americans, as a group, tend toward a more legalist mindset than many other nations throughout the world. Accountants and accounting educational programs in the United States, likewise, seek specific guidance in their endeavors and changes. As there is currently no specific guidance on a required level of knowledge for professionals other than the ability to pass the CPA exam with minimal IFRS content,
these groups have generally adopted a “wait and see” approach in effecting major changes associated with the international standards. Many plan to execute more comprehensive changes when more guidance and rules are released on the future and educational requirements associated with IFRS (AICPA 2011; KPMG LLP and AAA 2011). After compiling this work, however, this mindset seems to be an error in judgment on the part of accounting academics and their professional counterparts. The lack of guidance is could be overcome by developing a majority opinion between professionals, faculty, and students. This opinion would provide the necessary guidance to appropriately develop curriculum standards to address the global demand for United States accounting knowledge of IFRS. It would define a minimum knowledge level for moving into the profession. Seeking to overcome the “wait and see” approach, a study that shows desired professional knowledge could push the further development of official international accounting requirements through the CPA exam, AICPA guidance, or other such professional affiliations with influence over accounting programs at universities. This study seeks to be one of those foundational steps in creating a demand for the advancement in IFRS curriculum in response to professional and student demands associated with support from faculty. Accountants, more specifically CPAs, are considered through their certification to be held to the qualifications of a profession. Those belonging to a profession are found to be liable for continued expertise in their field, through an implied social contract, to the public in exchange for their trust and the prestige associated with their certification. Accountants are expected to uphold high standards
of knowledge in their field and demonstrate a commitment to accurately presenting financial information to the public. Although IFRS as a knowledge center remains a contested issue amongst professionals, IFRS is now an integral player in the business world. It would seem, to live up to the standards of their profession, accountants would need to develop a base level of IFRS knowledge on behalf of the American public in order to evaluate those international companies active in United States financial markets and internationally. IFRS presents an interesting conundrum to the United States accounting profession, especially at the university level. The question remains how long universities can continue to create globally competitive graduates with current curriculum. IFRS, like many trends in today’s highly technological and globally competitive economy, requires a constantly evolving and cutting edge approach. It is important to both teach and discuss the associated implications of the changes and the effects on the United States. Much like a technology curriculum and even the more recent evolvement of US GAAP in association with convergence efforts, the accounting academics must be prepared to develop a fluid curriculum surrounding IFRS knowledge. After speaking with all of the parties involved in the study, there is a demand for this global accounting knowledge and the expansion of education on IFRS in the United States. Hopefully, this demand can be met through the cooperative efforts of engaged students, dedicated faculty and involved professionals. This study has broadened my perspective to the importance of global education. In the United States, we as students tend toward a more isolated view of the
world due to geographic factors as well as the landlocked mindset that is often prevalent in our society. My research process, as well as my university experiences, has taught the importance of the global mindset, especially in today’s highly technological society. Through the research results, thesis and potential journal article, I hope to share the importance of an international education as well as an American education with the accounting community as a whole.
PART II: SCHOLARLY ARTICLE
Is the United States Ready to Work with the Global Financial Reporting Language?
Submitted to American Accounting Association Issues in Accounting Education
Submitted by Lisa Miller Honors Tutorial College -- Accounting Ohio University Athens, Ohio 45701
[email protected] 440.781.3792 Advised by Christine A. Yost School of Accountancy Ohio University Athens, Ohio 45701
[email protected] 740.593.0577
IS THE UNITED STATES READY TO WORK WITH THE GLOBAL FINANCIAL REPORTING LANGUAGE?
Abstract This study involves an investigation of the current state of IFRS education and training in the United States as well as a comparison of the current and future needs in the industry. The study sought to establish that universities needed to increase their IFRS coverage in order to meet industry demands. Mentioned as an item in need of further research in several IFRS-related articles, this information provides valuable insights to academia, students, and financial professionals for their academic planning. Through research and interviews with professionals and professors in finance and accounting, the study reveals a multidimensional perspective on IFRS education and training in the United States. The research also includes an analysis of students’ and professionals’ desire to advance their knowledge in the subject area, as well as industry opinions on what IFRS knowledge is needed for different levels of financial careers and responsibilities. The study overall explores the implications of IFRS on accounting education programs as a whole as well as the change that is needed to address the growing influence of the international standards on the United States financial community. Keywords: IFRS, Universities, Accounting Education
INTRODUCTION Accounting is considered to be the language of business, communicating a company’s performance, growth, and investments through its financial statements to its shareholders, competitors, and management team. The global financial world continues to shrink as both technology and international trade increase the flow of capital between countries’ economies. As business becomes increasingly global, accountants around the world are faced with the need to be able to communicate, or at least understand, the business languages of their counterparts. The financial world, however, currently stands at a crossroads as the global community strides toward financial comparability and consistency across nations, while the United States continues to function with its unique set of accounting standards. The United States financial environment, currently governed by the Generally Accepted Accounting Principles (GAAP), has faced increasing pressure for comparability, convergence, and conversion to the International Financial Reporting Standards (IFRS). IFRS, the international counterpart to US GAAP, has grown exponentially in its influence since its use was mandated in the European Union in 2005 (Mintz 2010). As of 2011, the international standards are used in over 120 countries worldwide (IFRS Foundation 2011; James 2011). The United States has sought to address the rise elsewhere of the international standards through convergence efforts with the international community, gradually moving the standards closer together through the issuance of similar standards in both GAAP and IFRS. With the continuance of these convergence efforts, the 2007 elimination of IFRSGAAP reconciliation requirements in the United States, and the January 2011
introduction of IFRS material on the CPA exam, IFRS has become necessary knowledge for accounting students and professionals in the United States (Kinkela, Harris and Malindredos 2010; James and Blaszczynski 2011; James 2011). Accounting education and standards setting tend toward a more reactive approach as exemplified by the introduction of Sarbanes-Oxley requirements earlier in the decade as well as the decision to approve the 150-hour education requirement for the CPA exam (Miller and Bahnson 2010; James 2011). As the Securities and Exchange Commission continues to defer an official decision on IFRS conversion in the United State in favor of extended convergence efforts, university educators have the opportunity to take a proactive approach in preparing their students for the global professional world. The extensive global influence of IFRS has left many universities aware of the need to address the international standards in their classrooms. Yet, universities also struggle to prepare students with this knowledge given the already full curriculum (Munter and Reckers 2010; Cherubini, et al. 2011; KPMG LLP and AAA 2011). The depth of faculty experience in this relatively new and constantly evolving subject has also presented challenges to many universities that are interested in creating learning opportunities in this area for their students. Universities have also cited lack of materials and budgets as issues impeding the expansion of IFRS coverage in their curriculum (Munter and Reckers 2010; KPMG LLP and AAA 2011). Although IFRS has become more prevalent in university- level curriculum in the past few years, the variation in coverage varies from institution to institution, ranging from the occasional
mention of the existence of IFRS to an intensive class noting the differences between IFRS and GAAP. The overall focus of this study regards an investigation of the current state of IFRS education and training in the United States as well as a comparison of the current and future needs in the industry. The study sought to establish that universities needed to increase their IFRS coverage in order to meet industry demands. Mentioned as an item in need of further research in several IFRS-related articles, this information provides valuable insights to academia, students, and financial professionals for their academic planning. Through research and interviews with professionals and professors in finance and accounting, the study provides a majority opinion on IFRS education and training in the United States. The research also includes an analysis of students’ and professionals’ desire to advance their knowledge in the subject area, and industry opinions on what IFRS knowledge is needed for different levels of financial careers and responsibilities. The study overall explores the implications of IFRS on the accounting education programs as a whole and what change is needed to address the growing influence of the international standards on the United States financial community. REVIEW OF PREVIOUS LITERATURE IFRS as a whole has been the subject of extensive research and commentary in the United States. Since its debut just over a decade ago, it has quickly gained ground
worldwide. Over 120 countries now utilize IFRS as their accounting standards (IFRS Foundation 2011The standards, published by the International Accounting Standards Board (IASB), take a principles-based approach to financial reporting. A different approach both with its technical rules and overall mindset than US GAAP, IFRS represents an educational challenge to those trained in the American standards (IFRS Foundation 2011). Although no formal decision has been made on a specific plan for the future of IFRS in the United States, the international standards have come to the United States through both the convergence efforts and the elimination of GAAP-IFRS reconciliations. Since 2002, an international effort has been made to move US GAAP and IFRS forward and closer together through the “convergence projects.” New standards are developed around major difference areas and are then implemented into both sets of standards. Projects are conducted by accounting area, compiling pieces of both sets of standards or creating a completely new core concept. Since the beginning of the projects, both sets of standards have moved closer together technically. In 2007, the SEC removed the barrier requiring foreign companies to reconcile their IFRS standards to US GAAP to be in the American financial markets (James and Blaszczynski 2010; Paul and Burks 2010; James 2011). This change has spurred the movement for IFRS knowledge forward in the United States. American accountants are now faced with having to review IFRS statements, creating a need for IFRS competency in the United States. They also must be able to work with the standards in
order to advise foreign clients or American clients with international investments, parents, and subsidiaries. Changes in Accounting Education Universities have been working to internationalize their curriculum since the introduction of the “worldwide dimension” was added to American Assembly of Collegiate Schools of Business (AACSB) in 1974 (Zhu, et al. 2011). The integration of IFRS into the American curriculum, however, did not begin until more recently when it rose in influence in the American financial markets. The accounting profession tends towards a more reactive approach to education, which has led to a slow introduction and incorporation of IFRS into the accounting curriculum. Past subject matters exhibiting this type of reactive approach include both the increase in required hours for CPA licensing to 150 semester hours or 225 quarter hours and the introduction of SOX 404 auditing requirements (Miller and Bahnson 2010; James 2011). The increased hours were often incorporated last minute to curriculum or added on with growing pains to university curriculums so that students are able to meet the requirements. This same trend has been apparent in the introduction of IFRS curriculum, especially with the uncertainty created by a constant change and push back on major dates associated with IFRS projects (KPMG LLP and AAA 2011).
Educational Demand Prior literature including studies and surveys of financial professionals present the importance of IFRS curriculum for the American financial markets (Cherubini, et al. 2011; Pounder 2011). The consensus of these professionals is that IFRS needs to be an area of attention in financial education. Most financial professionals believe that people in the field should have at least a basic working knowledge of IFRS. They also believe IFRS to be subject matter that should be included in their interview process for new hires (Munter and Reckers 2010; Cherubini, et al. 2011; Stokes, Isaacson and Clopper 2011; James 2011). Previous studies have also found that the introduction of IFRS has support from faculty at United States universities, but the international accounting standards also create many challenges for faculty. Most faculty members have indicated at least a basic incorporation of IFRS into their curriculum. (KPMG LLP and AAA 2011; Weiss 2011) They, however, also cite an overall struggle for resources to teach themselves and their students (KPMG LLP and AAA 2011; Stokes, Isaacson and Clopper 2011). Curriculum constraints and pressure from their departments have been indicated as barriers of IFRS education as well (Munter and Reckers 2010; Cherubini, et al. 2011).
RESEARCH METHODS This study utilized three research methods1 to obtain information on the state of IFRS education and training in the United States: 1) survey of current accounting students, 2) interviews with professionals in the accounting field and 3) interviews with professors in accountancy and finance. 67 students, 68 professionals and 23 educators of varying backgrounds responded to develop a multidimensional perspective on the current state of IFRS education in the United States. Results were further coded to categorize respondents by their background and company (or university) in order to remove any bias or create additional insights. Interviews and surveys were conducted in January and February of 2012. Research findings from both the interviews and surveys are discussed in the Results section of the paper. Survey and interview question templates can be found in Appendix A.
Student Perception Survey The researcher conducted a survey using the online Qualtrics software to gather information from students. The students surveyed were all accounting majors, but had varying levels of accounting experience ranging from one to more than seven intermediate or higher level accounting classes. The survey was sent to students of a midsize Midwest university due to its proximity to the researcher.
Surveys and interviews utilizing human respondents were approved by the Office of Research Compliance 1
Students were asked to describe the prevalence of IFRS subject matter in their current curriculum, their perception of their level of comfort with the material, and their thoughts on how much more or less IFRS could be included in the curriculum. Students were also asked to answer questions on IFRS inclusion on the CPA exam. They were also asked to answer an IFRS CPA question distributed by the AICPA for comparison with their perceptions. Interviews with Professionals Interviews were conducted with accounting professionals from firms of varying sizes, experience levels and backgrounds. Firms varied in size from independent practitioner firms with three or fewer professionals to employees from the international “Big Four” accounting firms. Employees’ experience levels varied from one year out of college to professionals with 20+ years of experience in the field. Backgrounds of interviewees were also varied to avoid bias including professionals in public accounting, those in private/corporate accounting, internationally focused accountants, and regional accountants. Interview questions sought to establish the firm’s view as well as the professional’s personal perceptions and experience with the subject matter. Interviewees were asked to cite their experiences with IFRS and its prevalence in their work environment. They were also asked about their firm’s expectations of new hires and in-house IFRS training. Professionals reflected on the how the industry has addressed IFRS overall and their own ability to work with it on the CPA exam and in the workplace moving into the future. The findings of the interviews helped the
researcher to establish a professional mindset on IFRS education and training in the United States. Interviews with Faculty Another set of interviews was conducted with faculty from several institutions across the country. The majority of the interviews were conducted with professors at Midwest universities due to proximity to the researcher. These interviews were supplemented with faculty from other institutions in order to create a broader research scope and comparison. Interview questions sought to establish the prevalence of IFRS in current curriculum, perceived student knowledge, and actual IFRS knowledge through survey questions. Finally, students were asked to reflect on their own views of preparedness to deal with IFRS in the workplace and their thoughts on further inclusion or less inclusion of IFRS into their university’s curriculum. SURVEY RESULTS Professional Mindset [Insert Table 1] Members of larger firms, especially those who are from public firms, placed more emphasis on the international standards. All respondents recognized a growing importance in obtaining knowledge on the international standards though actual knowledge achieved in their career was highly varied. Responses on necessary IFRS knowledge varied widely, and generally corresponded with the characteristics of the
respondents’ firms, such as higher knowledge would be necessary at a larger firm than a localized firm. When prompted to elaborate on the prevalence of IFRS in their workplace, 66 percent of respondents, as indicated in Table 1, replied that IFRS was becoming an increasing presence in their workplace over the last three years. [Insert Table 2] Respondents were asked to describe the IFRS education and training opportunities provided through their company. The most common responses were either internal training or that training was done externally through CPE classes and webcasts. As indicated by Table 2, over two-thirds of the respondents indicated that their firms currently offer varying levels of IFRS training. This figure generally corresponded to members of larger firms, with no members from small firms receiving internal training. More than 85 percent of respondents, including those from all firm sizes, cited that they have taken at least a basic information session on IFRS either through their company or a professional education program such as a webcast. [Insert Table 3] Professionals were asked to describe their backgrounds in IFRS. When segmented to highlight recent changes in IFRS education at the university level, 100 percent of respondents who have been working three years or less expressed some exposure to IFRS in their previous education. However, only one out of twenty respondents cited that they would be able to work with the international standards without further training and guidance when asked about comfort level working with
IFRS on the job as cited above in Table 3. Although encouraging that students have had some exposure in the last three years, the ratio of recent graduates who are able to work with IFRS indicates a necessary increase in exposure at universities. The findings indicate that students are not retaining a working knowledge into their professional careers, a concept further explored in the student perspective below. [Insert Table 4] In looking at all the professional respondents’ answers on their comfort level working with IFRS, this trend was echoed where, controlling for those considered “IFRS specialists," only 10 of the 57 non-specialist professionals expressed a working knowledge of the standards (see Table 4). The respondents cited their firm’s specialists and international counterparts as the current knowledge source when asked they dealt with IFRS clients and issues. [Insert Table 5] Another important trend is indicated by the 45 professionals considered to be involved in recruiting processes when asked about their firm’s expectations of incoming students. As indicated by Table 5, 86 percent considered IFRS materials to be a part of their considerations in hiring new employees in the last two years (since 2010). In addition, all 45 respondents indicated that they have interviewed a candidate who has been passed over due to lack of knowledge on recent occurrences in accounting, such as IFRS.
The Faculty Consensus There was no consistent approach to IFRS curriculum amongst the nine universities where faculty taught. Classroom inclusion ranged from brief mention of IFRS to extensive inclusion through a specific elective class or extensive integration with US Standards. The only consensus amongst the faculty was that IFRS needed to be covered in their program’s classes. All of the faculty respondents indicated that they believe IFRS to be a topic included in many of their students’ job and internship interviews. Additionally, 90 percent of the respondents responded that they believe IFRS knowledge could be advantageous in competing for top accounting opportunities. [Insert Table 6] The biggest difference maker in the inclusion of IFRS in the curriculum seemed to be an “IFRS sponsorship” from one of the firms. Schools affiliated with firms had more extensive materials, inclusion, and faculty training that translated to a more extensive IFRS curriculum overall (Weiss 2011). Of the schools that have received the earlier Big Four grants, 100 percent of responding faculty have seen a larger-scale integration of IFRS into their curriculum when asked about IFRS inclusion in their current curriculum as exhibited in Table 6. The universities that have not had historical finding, however, have seen only basic incorporation, with only two of the remaining faculty citing large-scale incorporations when prompted with the same question .Of the faculty members representing the schools who did not receive
an early grant, 76 percent of respondents believe that IFRS needs to be incorporated more extensively into their accounting curriculum in order to provide their students the best advantage. [Insert Table 7] The accounting faculty respondents were asked to reflect on their students’ readiness to address IFRS on the CPA exam. The majority of faculty believed that their students would require additional review for the CPA exam in order to be able to address IFRS questions. The same trend with “Big Four” grants was generally mirrored in the responses to CPA readiness as was present in the curriculum inclusion. When asked about their background and training in the international standards, 17 of 23 faculty respondents indicated that they had a basic knowledge of IFRS materials (see Table 7). [Insert 8] Shown in Table 8 above, when further queried about teaching IFRS in the classroom, all of those 17 respondents expressed a need to “read up” on the subject before they could teach it to students. Faculty respondents were also asked about why IFRS was not currently included more extensively in their curriculum. More than 60 percent of faculty respondents cited either time constraints or resource constraints as the reason that IFRS was not incorporated more into their university’s curriculum as indicated by Table 9 below. [Insert Table 9]
What Students Think [Insert Tables 10, 11, 12) A primary finding of the student survey was that students want to have the knowledge to address IFRS in the workplace. As shown in Table 10, 90 percent of responding students agree that their university needs to increase the IFRS coverage in their curriculum. The students also seem to be on par with the need for greater knowledge as only 64 percent of the responding students were aware that IFRS was on the CPA exam in Table 11, and only 38 percent were able to correctly answer an IFRS basic knowledge taken from the AICPA examples of CPA IFRS questions in Table 12 (AICPA 2010). Even when students who have taken fewer than four intermediate accounting classes are removed, the correct response rate remains low at only 50 percent as indicated by the level of accounting students as demonstrated by Table 13 below. [Insert Table 13] Students who think that IFRS should be included more in their university’s curriculum were prompted to explain “how” IFRS could be best incorporated (Students answering “No” did not receive the last question). Popular suggestions (shown below in Table 14] from the student respondents to further incorporate IFRS include creating an elective class, putting more emphasis on retention through case studies, writing research memos, and expanding the presence of IFRS on exams. A
student asking for an increase in curriculum content, in an already full and challenging subject, is a strong indicator of an acknowledged need in the professional setting. [Insert Table 14] DISCUSSION The majority opinion across professionals, students, and faculty is that IFRS is becoming more prevalent in the United States financial environment. The results of this study also indicate the increasing influence of the international standards in the United States is creating a push for IFRS knowledge and training in accounting professionals. The results indicate students generally seem to need more IFRS education to meet the requirements of the professional world, both in passing the CPA exam and excelling in interviews for positions. Professionals’ working knowledge on IFRS also seems to be lagging demand, allowing students who do acquire the knowledge in school or through training early in their career to create a competitive advantage for themselves in the workplace. Students have become cognizant of the rise of IFRS and desire that universities further incorporate this knowledge into their accounting curriculum. Accounting professors seem aware and interested in incorporating the IFRS curriculum, but are hampered by a general lack of knowledge, resources, and time to integrate the materials. Although this study was limited by the time frame and size of the study, it provides a unique triangular comparison of both sides of the academic environment
and professional expectations. The correlations drawn in this study help to tie together previous studies and supplements results with much larger scale studies. This study also creates an up-to-date majority opinion on the status of IFRS education in the United States as IFRS continues to be a quickly evolving topic as the Securities and Exchange Commission (SEC) continues its decision-making process as to the status of IFRS in the United States regulatory environment. Additionally, this study provides the perspective of a student in the midst of process with ties to multiple universities, professional organizations, and firms. There are several available avenues for further research on this topic. A study of the most effective way to bring IFRS to US students would be valuable in helping to determine how best to prepare students to work with the standards. Also, a repeat of this study would be valuable a few years in the future to show how the perceptions and knowledge have changed over time. As mentioned above and consistent with previous studies, the results indicated an overall demand for inclusion of IFRS in curriculum across professionals, faculty, and students (AICPA 2008-2011; James and Blaszczynski 2010; Cherubini, et al. 2011; KPMG LLP and AAA 2011; Pounder 2011). There seems to be an overall disconnect when it comes to the execution of IFRS education that became apparent in the direct comparison between the three groups central to this study. According to the study, IFRS education at the university level is currently lagging, but poised for increased incorporation due to student and professional demand.
APPENDIX A: RESEARCH INSTRUMENTS IFRS Education and Training in the United States – Faculty Version 1) How knowledgeable are you about IFRS? 2) Are you comfortable teaching IFRS in the classroom? 3) How much is IFRS currently incorporated into your curriculum? 4) Do you believe IFRS should be incorporated more or less into the curriculum? Why? 5) What are the professional expectations on international knowledge for your students? 6) Have students at your institution struggled with the incorporation of IFRS into the CPA Exam? 7) Any Additional Comments, Thoughts, etc on IFRS education and training in the United States: IFRS Education and Training in the United States – Professional Version 1) What kind of IFRS knowledge does your firm look for when recruiting students? 2) What is your background with IFRS? 3) How prevalent is IFRS in your work environment? 4) How well has the industry addressed IFRS in the United States? 5) What education and training is available for professionals and students through your firm? 6) How well did you feel prepared to work with IFRS on the job and IFRS questions on the CPA exam(if applicable)? 7) Any Additional Comments, Thoughts, etc on IFRS education and training in the United States: IFRS Education and Training in the United States – Student Version (Qualtrics) 1) I have completed _______ 300 level or higher accounting classes.
1-3
4-6
7+
2) Questions on International Financial Reporting Standards will be included on the CPA exam as of ___________.
They are already included on the CPA exam.
June 30, 2012
January 1, 2013
There are no plans for the CPA exam to add IFRS related questions.
3) How much are the International Financial Reporting Standards included in the curriculum at your university?
They are not taught in my accounting classes.
They are basically addressed or mentioned, but they are not taught in the classroom.
My university teaches basic differences and other basic IFRS topics.
IFRS is extensively covered in our classes or a specific IFRS class is offered.
4) Under IFRS, which of the following is a criterion that must be met in order for an item to be recognized as an intangible asset other than goodwill? (As Released by AICPA)
The item’s fair value can be measured reliably.
The item is part of the entity’s activities aimed at gaining new scientific or technical knowledge.
The item is expected to be used in the production or supply of goods or services.
The item is identifiable and lacks physical substance.
5) How knowledgeable do you consider yourself on IFRS? I feel very knowledgeable about IFRS.
Agree
Somewhat Agree
Only the Somewhat Basic Disagree Knowledge
Disagree
6) Do you believe IFRS curriculum should be incorporated more into your university's curriculum given that it will be tested on the CPA exam?
Yes
No
7) How do you think IFRS could be further incorporated into the curriculum?
REFERENCES American Institute of Ceritified Public Accountants (AICPA) Communications.2011. New IFRS Certificate Program Helps CPAs Demonstrate Expertise in Global Marketplace. American Institute of Certified Public Accountants (AICPA). 2008-2011. "IFRS Readiness Tracking Survey." American Institute of Certified Public Accountants (AICPA). 2010. "Test Your Knowledge of International Standards." Jouranl of Accountancy Online. Cherubini, J, K. Rich, H. Zhu, and A. Michenzi. 2011. "IFRS in the General Business Curriculum: Why Should We Care?" The CPA Journal: 13-15. IFRS Foundation. 2011. International Financial Reporting Standards Education Initiative Presentation. James, M L. 2011. "Integrating International Financial Reporting Standards into the Accounting Curriculum: Strategies, Benefits and Challenges." Academy of Education Leadership Journal: 127-142. James, M.L., and C. Blaszczynski. 2010. "Accounting Students' Perceptions of International Financial Reporting Standards." Journal for Global Business Education: 37-49. Kinkela, K., P. Harris, and J. Malindredos. "Introducing IFRS in Introductory Financial Accounting Courses." Business Education and Accreditation, 2010: 39-47. KPMG LLP and American Accounting Association (AAA). 2011. IFRS in the Accounting Curriculum Survey. Miller, P.B.W., and P.R. Bahnson. 2010. "The Spirit of Accounting: Deja Vu All Over Again: IFRS Convergence and the 150-Hr Requirement." Accounting Today: 14. Mintz, S.M. 2010. "Implementation Concerns about IFRS Adoption in the U.S." Journal of International Business Education: 97-116. Munter, P., and P.M.J. Reckers. 2010 "Uncertainties and Budget Shortfalls Hamper Curriculum Progress on IFRS." Issues in Accounting Education: 189-198. Paul, A., and E. Burks. 2010. "Preparing for International Financial Reporting Standards." Journal of Finance and Accountancy Online. Pounder, B. 2011. "Preparing for Continual Change." Financial Executive: 63-65.
Stokes, L., E. Isaacson, and I. Clopper. 2011."The Rush to IFRS: Practice v. Academe, Is the Need to Change the CPA Exam Genuine?" Journal of Modern Accounting and Auditing: 1197-1200. Weiss, J.M. 2011. "Implementing IFRS Curriculum into Accouting Programs." The CPA Journal: 62-63. Zhu, H., K.T. Rich, A.R. Michenzi, and J. Cherubini. 2011. "User-Oriented IFRS Education in Introductor Accounting at U.S Academic Institutions: Current Status and Influencing Factors." Issues in Accounting Education: 725-750.
Table 1
Professional Response: IFRS Prevalence in Their Workplace
Prevalent Some Work Not Prevalent Total Recent Increase Consistent Recently Total
Local
Regional
National & International
0 3 6 9 3 6 9
5 17 5 27 20 7 27
17 15 0 32 32 0 32
Table 2
Professional Response: Education and Training Available Through Their Firm
CPE Classes Webcasts Internal Classes/Seminars
Local
Regional
National & International
9 9 0
27 27 8
32 32 32
Table 3 Professional Response: Background Received or Exposure to IFRS
International/Hands On Classes at University Level CPE Classes Webcasts Internal Classes/Seminar
More than 3 Years 16 4 58 30 34
3 Years or Less 1 20 0 7 0
Table 4
Professional Response: Ability to Currently Work with IFRS
IFRS Specialist Working Knowledge Unable to Currently Work with IFRS
Overall 11 10 47
3 Years or Less 0 1 19
Table 5 Professional Response: Level of IFRS Knowledge Desired in New Hires Extensive Knowledge Basic Knowledge None Not Involved in Recruiting
0 30 15 23
Table 6
Faculty Response: IFRS Curriculum Incorporation Early IFRS Grant Other Schools Extensively Incorporated 5 0 Basic Incorporation 1 17 Not at All Incorporated 0 0 Total 6 17
Total 5 18 0 23
Table 7
Faculty Response: Faculty Knowledge of IFRS Very Knowledgeable 6 Basic Knowledge 17 No Knowledge 0
Table 8 Faculty Response: Faculty Comfortability Teaching IFRS Yes 6 No (Need More Education) 17
Table 9
Faculty Response: Barriers to Teaching IFRS Resources 11 Time Constraints 20 Administration/Department 7 IFRS Uncertainty 6 Did Not Discuss 3
Table 10 Student Response: If IFRS Should be Incorporated More into their Curriculum 60 90% Yes 7 10% No 67 100% Total
Table 11 Student Response: Ability to Answer AICPA IFRS CPA Question Overall 1-3 4-6 7+ Answered 22 2 3 17 Correctly Answered 45 21 18 6 Incorrectly 67 23 21 23 Total
Table 12 Student Response: Date of IFRS Inclusion on the CPA Exam They are already included on the CPA exam.
43
64%
June 30, 2012
9
13%
January 1, 2013
13
20%
There are no plans for the CPA exam to add IFRS related questions.
2
3%
Total
67
100%
Table 13 Student Response: Number of Intermediate or Higher Classes Completed 23 34% 1-3 21 31% 4-6 23 34% 7+ 67 100% Total
Table 14 Student Response: Ways to Further Incorporate IFRS *Note: Student who answered no to further incorporation were not give this question 16 More Research Papers/Memos 22 IFRS Class 12 IFRS Financial Statement Exercises 10 More Testing /Quizzing on IFRS
PART III: BIBLIOGRAPHY
Bibliography American Institute of Certified Public Accountants (AICPA). "IFRS Readiness Tracking Survey." 2008-2011.
American Institute of Certified Public Accountants (AICPA). "Test Your Knowledge of International Standards." Jouranl of Accountancy Online, 2010. Barry, J., and D. Kaplan. "SEC Statement on IFRS." IFRS Update, 2010. Chasan, Emily. "Accounting Rule Makers to Alter Convergence Plan." Reuters, 2010. Cherubini, Jason, Kevin Rich, Hong Zhu, and Alfred Michenzi. "IFRS in the General Business Curriculum: Why Should We Care?" The CPA Journal, 2011: 13-15. Deloitte. "Understanding the Impact of IFRS." University Education Presentation Series, 2010. IFRS Foundation. International Financial Reporting Standards Education Initiative Presentation. London, January 2011. James, Marianne L. "Integrating International Financial Reporting Standards into the Accounting Curriculum: Strategies, Benefits and Challenges." Academy of Education Leadership Journal, 2011: 127-142. James, Marianne L., and Carol Blaszczynski. "Accounting Students' Perceptions of International Financial Reporting Standards." Journal for Global Business Education, 2010: 37-49.
Kinkela, Katherine, Peter Harris, and John Malindredos. "Introducing IFRS in Introductory Financial Accounting Courses." Business Education and Accreditation, 2010: 39-47. KPMG LLP and American Accounting Association (AAA). IFRS in the Accounting Curriculum Survey. October 2011. Larson, R.K, and D. Street. "IFRS Teaching Resources: Available and Rapidly Growing." Accounting Education, 2011: 317-338. Miller, Paul B.W., and Paul R. Bahnson. "The Spirit of Accounting: Deja Vu All Over Again: IFRS Convergence and the 150-Hr Requirement." Accounting Today, 2010: 14. Mintz, S.M. "Implementation Concerns about IFRS Adoption in the U.S." Journal of International Business Education, 2010: 97-116. Munter, Paul, and Philip M.J. Reckers. "Uncertainties and Budget Shortfalls Hamper Curriculum Progress on IFRS." Issues in Accounting Education, 2010: 189198. Needles, Belverd E., and Marian Powers. International Financial Reporting Standards: An Introduction. South-Western Cengage Learning, 2010. Patrisso, Janice. "SEC Statement Provides Plan for Decision on IFRS Implementation in the US." Financial Reporting, 2010. Pounder, Bruce. "Preparing for Continual Change." Financial Executive, 2011: 63-65.
Stephens, Ray, interview by Lisa Miller. (May 26, 2010). Stokes, Leonard, Elena Isaacson, and Ilana Clopper. "The Rush to IFRS: Practice v. Academe, Is the Need to Change the CPA Exam Genuine?" Journal of Modern Accounting and Auditing, 2011: 1197-1200. Weiss, Jane M. "Implementing IFRS Curriculum into Accouting Programs." The CPA Journal, 2011: 62-63. Zhu, Hong, Kevin T. Rich, Alfred R. Michenzi, and Jason Cherubini. "User-Oriented IFRS Education in Introductor Accounting at U.S Academic Institutions: Current Status and Influencing Factors." Issues in Accounting Education, 2011: 725-750.
