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IFRS for SMEs in the US

Will IFRS (International Financial Reporting Standards) for SMEs (small and medium sized  enterprises) be the way private companies in the United States report?  Personally, I hope so.  It is looking like this may be a possibility.  I hear estimates that there are between 8 million and 20 million such private entities in the US.

First, let me provide some useful IFRS for SME resources which are helpful for US private companies: 

Now, why would I personally like to see the US go to IFRS for SMEs for reporting by US private companies? Here is my list of reasons: 

  1. IFRS for SMEs is easier than US GAAP.  The standards are something like 230 pages.  US GAAP is way bigger than that, most of which is not relevant to 99% of smaller and medium sized entities who report to say a bank in support of a loan.
  2. The rest of the world is moving toward IFRS and IFRS for SMEs.  The US should be part of the broader global community, not an island.
  3. IFRS for SMEs is high quality.
  4. Using IFRS for SMEs globally turns the very fragmented accounting software market into a global market.  This will reduce the cost of accounting software and improve the quality of that software for everyone.
  5. A global set of financial reporting standards means the possibility of a global framework for auditing those financial reports.  Today, auditing is more locally oriented.  If private companies around the world use IFRS for SMEs, auditing (reviews, compilations also) costs will go down.
  6. The AICPA has  recognized the IASB as an accounting standards setting body.  You can actually use IFRS for SMEs today, if your financial institution will accept it.
  7. If the SEC (Securities and Exchange Commission) mandates IFRS for public companies, which it just might do; private companies reporting alternatives could be one of the following: IFRS for SMEs, a US adapted version of IFRS for SMEs, full IFRS, a new separate GAAP for private companies, or US  GAAP as it exists today.  The IFRS for SMEs alternative seems to make the most sense, all things considered.

Will IFRS for SMEs be used by private companies in the US?  Time will tell.  My bet is yes. IFRS for SMEs is a concise, complete, simplified set of accounting principles which better meets the need of financial statement users, particularly if you see the world as a global economy.  On the other hand, the US conversion to the metric system didn't go that well.  We shall see what happens.

Posted on Tuesday, March 30, 2010 at 07:47AM by Registered CommenterCharlie in , , , , , | CommentsPost a Comment

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