A fellow AOL blogger, Victoria Erhart, wrote a fantastic piece on Bloggingstocks,
GAAP vs. IFRS: New accounting rules could mean trouble.She looks at the problems that will surely come up if the U.S. switches to International Financial Reporting Standards (IFRS).
Currently, U.S. accounting programs teach Generally Accepted Accounting Principles (GAAP) because that’s what’s used in the U.S. And the CPA exam tests accountants on GAAP, again because that’s what’s used.
But if American companies switch to IFRS, there’s going to be a problem. Who will teach IFRS? The move to IFRS makes sense simply because of the global nature of the modern business world. Victoria says:
Unless and until the SEC actually publicly states a date by which U.S. companies can or must shift to IFRS, nothing will move. Potential accountants will not be exposed to IFRS as part of the curriculum. The CPA exam will not require familiarity with IFRS. Present accounting faculty will not change their course syllabi or textbooks to include IFRS. Many may opt to retire rather than retrain and redesign their courses. Lead time for publishing a new textbook is at least two years, often longer. Who will write the new textbooks?
Conservatively, the SEC is looking at a five year lag once it finally establishes a date for the switch. At least we will all have plenty of time to get used to the idea.
And she’s right. Accounting professors with no working knowledge of IFRS aren’t going to be ready to teach it.
Cynthia Sneed (presumably professor at Jacksonville State University) got a bit hot under the collar about these comments. She says:
First of all-who are you calling “older?”
Accounting faculty are not any older than faculty in any other area. Second-are you suggesting that we not teach financial reporting using GAAP when that is what we use in this country?
We are not so narrow minded or ignorant as to not be able to change when and if the change is required. The reason we use GAAP has nothing to do with accounting faculty-we use GAAP b.c that is what we use for financial reporting in these United States.
When the SEC, FASB and AICPA changes we will change as well. Even those of us “older” guys (what? 40?) will somehow manage!
And my opinion is that the teaching of IFRS at the college level will experience the same problem that forensic accounting has. College professors with no field experience in the topic will try to teach it. That’s doing a huge disservice to the students, but professors will no doubt fail to recognize or admit this.
There’s more to a topic than a textbook and a classroom, and many college professors trying to teach forensic accounting are falling short. The same will happen with IFRS.