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:
- IASB IFRS for SME Web Site: Here is the official web site for IFRS for SMEs.
- AICPA IFRS for SMEs to US GAAP Comparison Wiki: The AICPA is making available a wiki which compares IFRS for SMEs to US GAAP which you can find here.
- IASB IFRS for SMEs Training: This web page has training materials you can download for free.
- IFRS for SMEs: The Next Standard for U.S. Private Companies? This is a Journal of Accountancy Article which looks at this question.
- Moss Adams Presentation: This is a Moss Adams presentation on the topic of IFRS for SMEs, a nice summary.
- IFRS Training: Here are some IFRS training courses in Seattle and Vancouver.
- AICPA IFRS FAQ: Here is a web page with frequently asked questions about IFRS for SMEs maintained by the AICPA.
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:
- 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.
- 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.
- IFRS for SMEs is high quality.
- 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.
- 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.
- 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.
- 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.