By Michael P. Cangemi
As financial executives of both public and private companies absorb the events and happenings of 2007 and look ahead at what's in store for them in 2008, FEI CEO and President Michael P. Cangemi has compiled the following list of the Top Challenges for 2008 - in no particular order: Global Convergence of US GAAP and IFRS. Are the US markets ready for principles-based standards? The first step towards answering that question is the Securities and Exchange Commission (SEC) decision in November to eliminate the US generally accepted accounting principles (GAAP) reconciliation for foreign private issuers that file financial statements in International Financial Reporting Standards (IFRS), as promulgated by the International Accounting Standards Board (IASB). Now on the agenda is consideration of the comments on the SEC concept release to allow US issuers to file financials in IFRS. On the flip side, we await another decision: Is the European Union (EU) ready to accept US GAAP without reconciliation to IFRS by non-EU based companies that list in the EU? And, will the EU continue to adopt IFRS with carve-outs, or will the EU follow IFRS, "as published by IASB?" With the IASB Small and Medium-Sized Entity (SME) standards also out for consideration, this is not just a public company issue. As FASB and IASB move toward global accounting standard convergence, the SME standard may likely keep pace with, rather than trail, the standards for public companies. Additionally, other priority issues include: strengthening the IASB's funding, governance and oversight as it increasingly moves towards becoming "the" global standard-setter in accounting. XBRL (eXtensible Business Reporting Language) and Interactive Financial Reporting. The SEC has clearly made XBRL a priority and continues to reinforce in all its communications that it favors a path toward adoption. Expect even more momentum in this direction in 2008 in advance of potential leadership changes at the SEC in an election year. By now, the full set of GAAP taxonomies has been released for public comment by April 4. Also, the SEC plans roundtables across the country to get preparer and user feedback. As the SEC moves forward with IFRS, the taxonomies for both GAAP and IFRS must also be considered together to ensure convergence occurs from a technology standpoint as well. Besides financial reporting, there are potential benefits in the areas of internal financial analysis and continuous auditing.
