Incorporating IFRS into Intermediate Accounting  Dr John Brozovsky Virginia Tech  Dr Patty Lobingier Virginia Tech Chicago IL

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Incorporating IFRS into Intermediate Accounting  Dr John Brozovsky Virginia Tech  Dr Patty Lobingier Virginia Tech Chicago IL Powered By Docstoc
					Incorporating IFRS into
Intermediate Accounting
 Dr. John Brozovsky, Virginia Tech

 Dr. Patty Lobingier, Virginia Tech

                                        Chicago, IL
                                       May 15, 2008

  Nature of the business world is a global economy with global

  Prior to 2005 there were few adopters of IFRS

  Once EU adopted IFRS in 2005, other countries have been more
   willing to consider adoption or conversion

  Many countries (over 100) are adopting IFRS though most not


  FASB and IASB are working together for a single set of high
   quality standards

  Current discussion is the US may adopt IFRS

  SEC is currently allowing foreign companies using IFRS that are
   US registrants to not provide a reconciliation to US GAAP

  Dates for implementation are varied but believed to be somewhere
   between 2011 and 2015

  Canada has already adopted IFRS with an implementation date of


  Goes beyond the basics of technical accounting

  Major Impact
    – Processes and controls
    – Statutory reporting
    – Technology infrastructure
    – Organizational issues
         Taxes, legal, pensions, etc.
    – Regulatory issues
         IRS estimates over $10 billion in additional tax revenues if LIFO is

Going Forward

  Without required implementation by US Companies, the urgency
   for including IFRS has been limited

  Impending adoption requires that we prepare students even
   though IFRS is not currently required

  With the increased use around the globe all students will have to
   deal with IFRS (foreign subsidiary or foreign parent) even without
   adoption by the US

Where Educators Fit In

  A significant shift in the accounting knowledge base must occur

  We supply the pipeline with educated students

  Obligation to prepare current students for the changes, waiting
   until an implementation date is too late


  International accounting knowledge is imparted in typically one of
   two ways

  A stand alone course
         Usually offered as an elective
         primarily at the graduate level
    – Incorporated into various accounting courses
         Usually not a fluid implementation process
              Lack of accessible information for many topics
         Often brought into the classroom for topics that are easily covered (JIT,
          foreign exchange, financial statement presentation)
         Format for incorporation is varied (cases, videos, foreign annual reports)

Learning Styles

  In order to impart the required knowledge in the best manner
   possible it is helpful to look at various learning styles

  Two common learning styles

    – Segregated learning – traditional approach used by most undergraduate
      business schools where each subject area is taught independently

    – Horizontal learning – subjects are divided into common areas and taught
      cross functionally

Our Approach

  Horizontal Learning

    – Says that students learn best when related subjects are taught concurrently
         Leases
         Revenue recognition
         Inventory

    – Used extensively in medical schools
         Segregated learning has separate courses for physiology, anatomy,
         Horizontal learning teaches systems, for example, vascular, nervous,

What We Did

  Prior years had a separate graduate elective course – Multi-
   National Accounting

  Last two years had increasing emphasis on international
   coverage in intermediate accounting

  Began extensively integrating IFRS into Intermediate Accounting
   this spring

What We Did

  Provided students with notes, examples and problems for each
   chapter in Intermediate Accounting

  As each chapter is covered, the relevant IFRS are discussed

  Examples are provided, problems are assigned

  Exams include questions on this material

What We Found

  Allows us to have consistent coverage on all the topics, with a
   discussion for each chapter and not just for those topics that have
   traditionally been covered

  Student interest in international reporting and rules appears to
   have increased

  Improvements in class structure and time management
    – Only way to insure that all students receive this information is to have a
      required undergraduate class in international accounting
      (something most curricula can not accommodate)
    – Avoiding redundancies in lectures
         With a stand alone course – often the GAAP must be revisited prior to
          covering the international approach

Going Forward

  Our transition is easy once the switch to IFRS takes place

  As adjustments are made in the pre-adoption period we have an
   easy mechanism for incorporating these changes

  We have focused on Intermediate Accounting but will now use the
   same approach in other classes such as Advanced Accounting and
   Financial Statement Analysis

  Allows us to more quickly consider and implement the curriculum
   changes that need to be made to other classes such audit,
   systems, and tax


 Our graduates will be quickly exposed to the need to translate
  international financial statements

 Teaching the international standards in conjunction with GAAP
   – Emphasizes the importance and implications of adoption
   – Minimizes classroom redundancies
   – Allows all accounting students to have exposure


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