Candela Solutions partner Ron Kral says international accounting standards could be "more onerous than Sarbanes-Oxley." It may be hard to believe at first; how could anything be worse than Sarbox? But as Kral points out in a Wisconsin Technology Network piece, there is a wide gap between Generally Acceptable Accounting Principles (GAAP) in the U.S. -- no pun intended -- and the International Accounting Standards Board's International Financial Reporting Standards.
U.S. GAAP, he says, are rules-based and consists of long, complicated standards. (Try 800-plus pages on derivatives alone.) And its shortcomings are well known around the world. Take Japanese company NEC, for example. Earlier this year, Kral says,
NEC announced..."that it was not able to complete a U.S. GAAP-required analysis relating to software, maintenance, and service revenues." In essence, the company said it simply cannot figure out U.S. GAAP revenue recognition rules and will stop trying, resulting in suspended trading on the NASDAQ.
IFRS, on the other hand, are principles-based and give companies "more presentation freedom." The biggest difference could be that IFRS will require three statements rather than a single "bottom line" or "net income number."
According to Wisconsin Technology Network:
[T]he working proposal would require three separate statements: a statement of financial position, a statement of comprehensive income, and a statement of cash flows. Companies would need to breakout in each financial statement information for business activities (including operating and investing activities), discontinued operations, financing activities, income taxes, and equity.