One of the major differences between the two standards is going to be that whereas GAAP emphasizes rules, the IFRS is a principle-based approach. Implementing a principles-based approach has significant implications for American tax practice. Many of the specific differences between the two systems will have a direct impact on tax practice. In IFRS, LIFO is prohibited and inventory write-downs may be reversed in certain circumstances (Gill, 2007). The impact on tax practice will be a shift in emphasis on the profession towards finding ways to leverage the looseness of the principles in IFRS to lower the entity's tax burden.
The SEC announced in 2008 that IFRS could come to the U.S. As early as 2014. This move would impact on all publicly-traded U.S. firms (PriceWaterhouseCoopers, 2010). Accounting firms are already preparing for this shift. The most significant implication for the industry will be an increase in business as firms attempt to navigate the new rules. For years prior to IFRS and for years after, it is reasonable to expect that the role of tax accountancy will shift again, towards implementation of IFRS. This will create new work for the industry, in particular because the emphasis on the audit function and compliance is not expected to decrease.
Given the recent trends in tax accountancy, the impact of these changes should take two forms. The first will be a return to emphasis on minimizing tax requirements. During the implementation of period of IFRS, there is bound to be a slight reduction in regulatory oversight, or at the very least there will be opportunities to test the limits of the new principles. Tax accountants will once again be called upon to minimize the tax burden of their clients, in line with the new rules.
That said, the second major impact of the implementation of IFRS is that there will be substantial emphasis on compliance. Accounting firms will be cultivating IFRS specialists, whose role it will be to ensure compliance to the new standards throughout the change process. These specialists will also be called upon to find the best ways to reduce tax exposure under the new rules.
Given the sweeping nature of the shift towards IFRS, it is expected that demand for tax accountants will increase significantly in response to the new rules. Tax accountants will be called upon to perform all of their usual functions, but there will be a need for many more accountants in order to handle the addition work involved in implementing a new accounting system.
Even before IFRS is officially brought to the United States, the FASB has considered replacing FAS No. 109 with the IAS No. 12. The two standards were set to be included in the converge discussions, but the FASB is considering to essentially adopt the international standard outright (Whitehouse, 2008). This would have a significant impact on the tax accounting profession. The rules that have been used since 1992 would be removed entirely, and replaced with a new set of principles. The industry would be faced with a massive challenge in trying to adapt to the new standard. An entire sub-industry can be expected to arise specializing simply in IFRS compliance.
There are also going to be changes with respect to Financial Interpretation No. 48, which governs accounting for uncertainty in income taxes. The American and international standards disagree here as well. The international standard does not account for uncertainty in tax provisions. If the U.S. cannot have uncertainty incorporated in to the new standards, tax accountants will need to help firms address the issue of tax uncertainty. Tax accountants would need to analyze uncertain transactions and established a probability weight for them (Whitehouse, 2008). This would increase the importance of tax accountants under the new rules, if the international standard goes through.
A shift to international standards would also make the tax auditing role more complicated. Financial Interpretation No. 48 is viewed as contentious by executives in part because it "gives auditors a roadmap of where to look for trouble." International rules have no such disclosures. Since SOX was put into law, the tax audit function has become an increasingly important role for tax accountants. If these disclosures were removed, the audit function would be made much more difficult. The audit would still need to be performed, but without the disclosures the tax accountant would need to spend more time conducting the audit. Losing the disclosures would thus make it more difficult for tax auditors to...
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