Ready or Not, Here Comes IFRS

As U.S. businesses prepare to adopt international financial reporting standards, American business schools consider how to incorporate the new requirements into the curriculum.
Ready or Not, Here Comes IFRS

Business professors always want to prepare students to work in the corporation of the future, but rarely have they been so focused on a particular date. In this case, the date is 2014, and it’s accounting professors specifically who have circled that year in red. If, as expected, the Securities and Exchange Commission decides U.S. companies should switch from Generally Accepted Accounting Principles (GAAP) to International Financial Reporting Standards (IFRS), 2014 is the year when companies would be required to follow the new standards. At that time, business school graduates and professionals in the workplace would need to understand the differences between the two systems—and how those international standards work.

While U.S. business schools are already considering how to incorporate IFRS into the curriculum, most of them aren’t yet ready to teach the new standards.

According to more than 500 professors surveyed last fall by the American Accounting Association and KPMG LLP, 62 percent have not taken any significant actions to incorporate IFRS into their programs. Thirty percent of survey respondents expect the class of 2011 to be the first one to have a substantial grounding in IFRS education. That means there’s a lot of ground still to cover in the next five years. Fortunately, a great deal of help is available.

Resource Guide

As much as anything, learning IFRS requires adopting a new mindset. “The IFRS are principles-based, whereas U.S. GAAP is very rules-based,” says Presha Neidermeyer, associate professor of accounting at West Virginia University’s College of Business and Economics in Morgantown. “Under GAAP, if something is not specifically excluded, then it’s automatically allowed. But a principles-based system operates much more like a framework of accounting.”

There are several reasons U.S. schools have delayed adding that IFRS framework to their curricula. According to 38 percent of respondents to the AAA/KPMG survey, administrators have little or no understanding of the effort needed to make the change. Seventy-nine percent of respondents say that their key challenge will be developing curriculum materials, while 72 percent say it will be making room for IFRS in the curriculum. Meanwhile, only 16 percent of respondents indicate that their schools will fund training for professors to learn about IFRS so they can teach it to students.

But one of the biggest problems, and one cited by 42 percent of respondents, is that textbooks probably won’t incorporate IFRS education until the 2011 academic year. It’s a problem that European business professors are already familiar with. Since most publicly traded European countries switched to IFRS in 2005, European schools have already had a head start on teaching IFRS to their students—and coping with some of the challenges.

“The problem between 2005 and 2007 was that there were no good textbooks available,” says Philip Joos, professor of accounting on the Faculty of Economics and Business Administration at Tilburg University in The Netherlands. He notes that there still isn’t an IFRS equivalent of the standard textbook—Financial Reporting and Analysis by Lawrence Revsine, Daniel Collins, and W. Bruce Johnson—used in the third year of Tilburg’s bachelor’s program.

Big Four accounting firms and the SEC are all doing their parts to fill in that knowledge gap and prepare faculty to educate students. For instance, last summer, Deloitte announced that nearly 100 colleges and universities had joined its IFRS University Consortium, designed to bring IFRS into college curricula. Deloitte also contributed support to Ohio State University and Virginia Tech, founding members of the consortium, for the development of IFRS course materials. Resources available for educators include tapes of on-campus lectures and transcripts from Deloitte subject matter leaders, actual case studies, and case solutions. More information can be found at

PricewaterhouseCoopers LLP has announced that it will award $700,000 in grants to colleges to help them prepare U.S. accounting students for IFRS; the grants are part of a $1 million commitment PwC has made to support IFRS education. Initially, the program will assist 26 U.S. schools in adding IFRS to their curricula. Colleges and universities are expected to use the grants to update accounting courses, transform textbooks, and enhance the focus on international business. PwC is also providing educational material directly to students and faculty through a suite of Web-based videos and tools available at

The biggest problem is that textbooks probably won’t incorporate IFRS education until the 2011 academic year.

Similarly, Ernst & Young ( has committed $1 million to the Ernst & Young Academic Resource Center, a collaboration between E&Y professionals and university faculty that focuses on bringing IFRS into the curriculum. KPMG has launched the KPMG IFRS Institute (, an open forum with Webcasts, podcasts, surveys, publications, and other materials to facilitate knowledge sharing and adoption of best practices throughout the industry.

The U.S. Securities and Exchange Commission also has put extensive information online at This site includes transcripts of roundtable discussions about IFRS among members of industry and academia, as well as other materials.

Knowledgeable Friends

More personalized and hands-on help also will get accounting programs geared up to teach IFRS. Schools report that they are calling on alums and advisory councils for guidance or asking in-house international accounting experts to hold training workshops for other professors who teach relevant courses.

“Up to this point, our faculty members have benefited significantly from receiving relevant materials from our friends in the profession,” says Don Tidrick, Deloitte professor of accountancy at Northern Illinois University in DeKalb. “In particular, the executive advisory council members have provided input and guidance over time to help us stay connected to relevant professional developments.”

European professors also have advice to offer to their American counterparts. First, grow accustomed to the idea that the adoption of international standards is inevitable. “U.S. schools need to understand that it is not a matter of whether the U.S. will adopt IFRS, but at what speed it will adopt IFRS,” says Joos of Tilburg University. “The ongoing convergence will generate standards that are identical.”

Second, realize it might not be so bad. “No accounting faculty should experience any difficulty teaching IFRS,” says Fernando Peñalva, associate professor of accounting and control at IESE Business School of the University of Navarra in Barcelona, Spain. The school introduced IFRS into its curriculum more than 15 years ago to accommodate a highly international student body. “Despite claims that there are many differences between U.S. GAAP and IFRS, there are far more similarities than differences.”

U.S. schools need to understand that it is not a matter of whether the U.S. will adopt IFRS, but at what speed it will adopt IFRS.
—Philip Joos, Tilburg University

Joos notes that both students and teachers will benefit if schools teach the IFRS conceptual framework, and not just the accounting rules that keep changing. Crediting that observation to an article in Accounting Review by Stanford professor Mary Barth, he adds, “That way, students will see and better understand the differences between U.S. GAAP and IFRS.”

Students also need to understand that financial reporting standards are not the only element used to compare financial reports between different firms, says Joos. “Two of the largest retailers in the world are Ahold and Carrefour. Although they both apply IFRS and operate in the same industry, it is not easy to compare their financial reports. Students need to be aware of different reporting incentives across firms—and countries.”

Challenges Ahead

As U.S. business schools figure out how to teach international standards, many are introducing IFRS to the curriculum in incremental stages, first as electives, then as part of required courses. This approach makes sense, says Tidrick of Northern Illinois University, “because today’s accounting graduates don’t need to be fluent in IFRS immediately, though they need to be conversant with the standards. Of course, at some point, our primary emphasis will have to shift in favor of IFRS.”

Some fluency was essential as early as this hiring season, says Neidermeyer. “For 2009, most of the major accounting firms expected interns to know the difference between IFRS and GAAP and how they’ll be affected even if they never decide to leave the U.S.,” she says.

Challenges certainly still lie ahead for U.S. business schools and businesses. To ensure that accounting standards are interpreted and enforced consistently across borders, regulators will have to work together, says Peñalva of IESE. But he’s hopeful about the outcome.

“For the first time in history, we are really close to having a common set of accounting standards used by all countries,” he says. “IFRS will facilitate enormously the interpretation of financial reports, the teaching of accounting, the mobility of accounting experts, and the improvement and development of accounting standards.”

Europe’s broad adoption of IFRS in 2005 was similar to the EU’s implementation of the euro currency in 2002, Joos points out. “It took several years for people to become familiar with the euro, and they were constantly making conversions to the local currencies. By 2009, that has all stopped,” he says. “It’s clear that IFRS is becoming the world’s accounting standard. In the long run, all financial accounting courses will be IFRS-based.”

A globalized set of accounting standards, while challenging to implement, will no doubt have far-reaching effects on interconnected, international business. As today’s business schools give their students a proper grounding in IFRS, they’re preparing their graduates to play essential roles in global companies and contribute to the turnaround of the worldwide economy.