That’s right, the International Financial Reporting Standards (IFRS) could be replacing the Generally Accepted Accounting Principles (GAAP) at your US headquarters in as little as four years with the current proposals on the table. And since you have to maintain double books for a year (in GAAP and IFRS) before you switch over, to make sure you have a good handle on the new rules, that means your new IFRS-friendly systems have to be in place in less than three years. Which means your people have to be trained in less than two years … especially since major exams, like the CPA, will start testing on IFRS material in 2012. (And when you consider that the EU has been using IFRS for five years now, and that over 120 countries have already adopted it, it’s about time that North America caught up. Canada catches up next year, and Mexico follows suit in 2012.)
The IFRS has a number of changes in store for supply chain management, including these four outlined in this recent ISM article on the accounting changes ahead:
- Last In, First Out
IFRS does not permit inventory to be valued using LIFO. This can have significant tax consequences.
- Inventory Valuation
Under IFRS, the inventory valuation you use must reflect current market price.
- Long-Term Contracts
Under IFRS, when you take possession of inventory, you take responsibility for it and it must be reported on financial statements.
- Management Responsibility
The responsibility of management with respect to data collection and reporting is much greater under IFRS.
The complete overhaul of systems that will be required at many companies could make SOX look like a walk in the park. If you haven’t yet figured out how it’s going to affect your organization, better find an expert sooner rather than later.