Small Businesses Face Painful Transition from GAAP to IFRS

Small businesses could face severe regulatory challenges as the U.S. continues its effort to converge its generally accepted accounting principles (GAAP) with International Financial Reporting Standards (IFRS).

The process of creating a singular global accounting standard has been ongoing for several years now, but at a recent roundtable hosted by the U.S. Securities and Exchange Commission (SEC), no matter how regulators choose to go about imposing the new standard on the nation’s public companies, the smaller of them will face technical and financial difficulty.

“I see no benefit to IFRS at all,” said Shannon Greene, a panelist at the roundtable and chief financial officer and treasurer of Tandy Leather Factory, Inc., a small leather and leatherworking supply company based in Fort Worth, Texas. “All it’s going to do is cost us money.”

Greene noted that while her company is looking to expand internationally, as many other small companies are in a time of booming export opportunities and low domestic demand, there will be no real way to escape the cost of implementing and abiding by the new standard. “I think it’s just going to be painful for a small company,” she noted, adding that while regulators often cite increased comparability as a benefit afforded to companies that switch to IFRS, Tandy Leather Factory’s unique position and industry renders this benefit largely non-existent. “For comparability purposes, we don’t really have any competitors,” said Greene. “I don’t even get the benefit of my financial statements being comparable to someone else’s financial statements for investment purposes, for banking purposes, for capital investment purposes, et cetera.”

“Anytime you ask us to spend money that doesn’t help us sell more product, you get a lot of flak from the senior management team,” she added. “I don’t have anything really positive to say from our company’s perspective. Personally, I get it, but I just can’t see how we get from where we are to where we want to be.”

Jacob Barron, NACM staff writer

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