Lessons learned from Europe's IFRS conversion.

• Position: International Financial Reporting Standards

Many United States companies are waiting for a "date certain" before investing significant time and resources toward possible adoption of International Financial Reporting Standards. Now that the U.S. Securities and Exchange Commission has released its IFRS roadmap for public Comment, that part of the wait is over. So, how does a company start the process?

Cheryl Graziano, vice president Research and Operations, Financial Executives Research Foundation and Ellen M. Heffes, editor-in-chief, Financial Executive, asked Danita Ostling to share some of her experiences with companies that are using IFRS in Europe and how the lessons they learned can be applied to U.S firms.

Ostling is a partner in Ernst & Young's Assurance and Advisory Business Services group and Americas IFRS leader. Prior to Coordinating the firm's IFRS accounting guidance and consultative services within the Americas, she worked eight years in London as deputy director of E&Y's Global AABS professional practice. During that time, she witnessed Europe's IFRS conversion first-hand. In the following, Ostling provides a practical perspective for comparing Europe's conversion to the potential U.S. move to IFRS.

"The real reason we are talking about this," Ostling says, "is because the SEC and Financial Accounting Standards Board fundamentally believe the overarching objective is to get to single set of high-quality global standards." IFRS is currently being used in about 100 countries and its' pretty clear that if we are to achieve one set of standards--because of the size of the U.S. market--we can't be an outlier."

As with any new regulations or standards, timing is the primary challenge. Ostling notes that in 2003, when Europe announced its decision to move to IFRS in 2005--because comparative years had to be disclosed--the actual date of adoption was Jan. 1, 2004; there wasn't much time to make the change.

"Everyone in Europe, including Ernst & Young, would have liked to have had more lead time to better prepare for conversion and embed [IFRS] into their processes," she says.

Ostling and her firm repeatedly warn that" IFRS affects more processes and departments in a company [other than accounting and financial reporting]."Having adequate time is important, she says, "to reflect on the broader effects and put in [place] plans for conversion."

At the time, IFRS was mandated in Europe for all listed public companies that had to file consolidated financial statements with...