Accounting without borders: has its time come? There's a lot more to International Financial Reporting Standards than simply accounting. As multinationals file in IFRS around the world and U.S. companies consider IFRS for the U.S., every aspect of the business will be affected. Here's what three leading global companies are thinking--and doing.

• Author: Heffes, Ellen M.
• Position: FINANCIAL REPORTING

What do companies as diverse as IBM Corp., Credit Suisse Group and Intel Corp. have in common? While all of these three leading companies file their financials according to U.S. generally accepted accounting principles (GAAP) as their primary filing choice, they are also significantly impacted by the use of International Financial Reporting Standards (IFRS) in a variety of jurisdictions around the globe.

And, while all these three multinationals recognize the potential benefits of one consistent set of accounting principles around the globe, if given the choice today, not one of them would quickly make the move from U.S. GAAP to IFRS. At least, not yet.

In 2001, Credit Suisse Group, a Switzerland-based company that is listed on the Swiss Stock Exchange, considered the choice it was given by the exchange of applying either IFRS or U.S. GAAP. Since IFRS was, in a sense, still under construction at the time, and since the company also lists in the U.S., it chose U.S. GAAP for its primary set of accounting standards, says Rudolf A. Bless, Credit Suisse's group chief accounting officer.

He says that by 2005, when much of local European and Asian statutory regulations required either full or partial IFRS implementation, Credit Suisse applied IFRS in dozens of its subsidiaries in these areas. Credit Suisse has operations in 50 countries, with over 150 legal entities in more than 20 countries that report in accordance with IFRS.

In late 2004, IBM convened a centralized project team at its Somers, N.Y., corporate headquarters consisting of representatives from accounting, tax, treasury and legal representation from inside the company, as well as its external auditors, both for U.S. GAAP and statutory filings around the world. Additionally, external consultants were hired, primarily to protect the independence of its internal auditors.

Next, a steering committee was formed with the senior members of the key functions--treasurer, chief accountant, senior tax executive, senior legal counsel--to provide overall corporate governance. The committee guided a team, led by Senior Program Manager, Accounting Practices Aaron Anderson, which was charged with consistent execution across the company's geographic areas.

IBM files consolidated financial statements and SEC filings based on U.S. GAAP. Its worldwide accounting operations--performed through regional accounting centers located in various places around the globe--are primarily focused on producing U.S. GAAP-based financial results; use of IFRS is primarily for statutory reporting. Currently, says Gregg L. Nelson, vice president, Accounting Policy and Financial Reporting, "we do not have any requirements for IFRS outside of statutory reporting, be it either country-specific or tax-filing requirements."

A benefit derived from the process, says Nelson--who refers to IBM's approach as a "corporate push model," versus "letting it happen in each individual country"--was eliminating surprises and ensuring consistency in application.

Intel also applies IFRS where required by local regulatory authorities. This includes application of full IFRS in countries such as the Philippines, Australia, South Africa, Hong Kong and Singapore, and partially adopted IFRS in the U.K. and Israel, as "pursuant to the convergence roadmaps in those countries," says Jim Campbell, Intel's vice president and corporate controller.

Accounting Becomes More Interesting

Most finance executives have likely been spoon-fed on the concept that in business, "change is constant, so just accept it and go with it." But some have likely taken small comfort in knowing that accounting was, well, accounting. But now that the lexicon for accounting language includes IFRS, in addition to the various country-level GAAPs, it's clear that it's more than just simply accounting.

Developed by the International Accounting Standards Board (IASB), IFRS are currently accepted--to some degree--in about 100 countries. IASB expects this number to climb to over 150 countries by 2011.

Additionally, in a widely anticipated move, the U.S. Securities and Exchange Commission (SEC) on July 2 released a proposed rule for comment that would allow foreign filers of public companies to drop the reconciliation to U.S. GAAP requirement for...