Why Is the CPA Exam Testing IFRS If Even the AICPA Says We Won’t Use It For at Least Five Years?

Speaking at the AICPA EDGE Conference in Orlando last week, the AICPA's Greg Anton said while the AICPA supports giving US companies the option to use IFRS to prepare their financial statements and would like to see one set of accounting standards, the "absolute soonest" IFRS will be seen in the US will be five to six years from now. Gimme one second to strap my math hat on here… FASB and the IASB have been working on convergence since 2002… we first heard about the elusive IFRS roadmap in 2008… IFRS started appearing on the CPA exam in 2011… it's now 2012… five years from now is 2017 – HOLY CRAP, you're telling me nine years after the SEC announcement and six years after IFRS showed up the CPA exam we might be ready to start using IFRS? I'm so excited!

Everyone knows the road to convergence has been paved with good intentions, huge embarrassments, a lot of misunderstandings and plenty of hurt feelings on both sides. That's a polite way of saying it's been a bit of a joke thus far and even the IFRS-in-the-US cheerleaders know it.

IFRS testing on the CPA exam has been fairly scant since it was thrown in two years ago but it's still there, despite accounting education still playing catch-up. But why, if even the AICPA says we won't be using it for at least another half a decade?

While the Big 4 are busting their humps to inject IFRS into academia, you're talking about teaching a standard that won't even be in play by the time the average accounting student graduates. Might as well just start teaching it to high school econ students while we're at it for about as effective as that will be. Unless an accounting student plans to kick off their career in any one of the 100+ countries that aren't the United States which use IFRS (unlikely), it seems a waste of curriculum to focus on an accounting standard we don't use and won't until this year's accounting freshman is in their second or third year of their career, doesn't it?

Perhaps the industry jumped the gun a tad but there are valid applications for IFRS in education that are pretty important today, not that mythical point five or six years from now when U.S. public companies may start using IFRS.

Bill Schneider puts it into perspective on the GSCPA blog:

While the few thousand U.S. public companies cannot file IFRS financial statements to meet their SEC reporting requirements, with the addition of Canada to the IFRS hold, several hundred foreign issuers already do file IFRS financial statements with the SEC.  In addition, thousands more subsidiaries of foreign companies operating in the U.S. use IFRS for their day to day accounting.  That means your colleagues working for Siemens, BMW, Mercedes Benz, and T Mobile are already using IFRS as their accounting standards and the number of such companies grows every day.

So yeah, does FAR need to consist of 50% IFRS and 50% GAAP at this point? Absolutely not, and it doesn't. Should it maybe have a few IFRS questions thrown in for now until we have better agreement between the IASB and FASB on how to hold hands and work together and a solid plan for IFRS adoption – if we can even decide on that much – once both sides learn how to play nice? Sure, why not. The exam already covers a metric shit ton of stuff you guys might never see in your day-to-day, what's a couple more items?

Remember, the CPA exam tests entry level knowledge and doesn't necessarily have much basis in reality. As I've always said: there are two worlds, the CPA exam world and the real world. In the CPA exam world, you always follow the appropriate procedures and when given a choice, you choose the method that takes more work. Who uses the direct method to prepare cash flow statements? And yet how often are you tested on it on the CPA exam? Do they test Same As Last Year in Audit? Of course not. See where I'm going with this?

Knowing a little about IFRS doesn't hurt and can only help if this whole adoption plan goes forward as planned, which it looks like it will even if it takes 20 years. Who knows, maybe by the time most of you are ready to retire, we'll actually be ready to start using it. And then won't you be glad that the professional examination you took 40 years ago asked a handful of questions pertaining to it? I know my equities feel safer already.

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