The bilingual CPA: are you fluent in IFRS and U.S. GAAP?

Author:Campbell, Terry
Position:Certified public accountant, international financial reporting standards, generally accepted accounting principles

Accountants preparing and auditing financial statements for U.S. companies stand a good chance of encountering IFRS. The SEC requires financial statements to be filed in U.S. GAAP, and U.S. users of financial statements, particularly lenders, tend to follow the SEC preference, but IFRS is an integral part of U.S. business.

U.S. multinationals with significant holdings in more than 100 countries use IFRS in financial filings. That includes an increasing number of small and medium-size companies, which in turn affects their auditors. Also, a fair number of private U.S. companies require IFRS because they are owned by foreign stakeholders.

Fluency in both accounting standards may be needed to assess a competitor, to check the financial stability of a supplier, to conduct due diligence in a merger or acquisition, or to answer questions from a foreign investor.

Clients, potential clients, competitors, suppliers, and customers of CPAs prepare financial statements using IFRS. Companies have subsidiaries and/or joint ventures that use IFRS. Even SMEs (small and medium-size enterprises) are involved in global settings with suppliers and/or customers. IFRS is used in numerous instances in which accountants encounter the need to compare, contrast, and reconcile IFRS to U.S. GAAP.


Foreign private issuers filing a Form 20-F with the SEC no longer have to provide a reconciliation of their financial reports to U.S. GAAP.That makes IFRS the accepted standard for SEC reporting for more than 450 international companies such as Unilever, a British-Dutch multinational consumer goods company, and requires that accountants be fluent in IFRS and U.S. GAAP.

In 2007, the last year in which the SEC required reconciliations, Unilever reported in SEC filings a 2006 net income of 5.015 billion [euro] in IFRS and 4.385 billion [euro] in U.S. GAAP, a difference of 630 million [euro], or 13%. In a world where an earnings-per-share difference of 0.01 [euro] was significant, it seems likely that a difference of 0.21 [euro] per share was significant, though IFRS and U.S. GAAP have gotten closer since then.


Due diligence in the form of a competitive analysis is key to a merger, acquisition, or divestiture. Accountants working on such an analysis are likely to run into competitors, buyers, and suppliers that report their financial results in IFRS. Given the speed needed in M&A deals, financial reporting differences take on a higher level of intensity. Only adequate preparation and...

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