How will changing from GAAP to IFRS impact boards?
IFRS will require board members to be more conceptually focused. The current detailed, rules-based system will be replaced by the concept of ‘do the right thing.’ Currently, board members are required to have an understanding of GAAP; under IFRS, they will be required to exercise greater judgment regarding the accounting treatment of transactions. Management will have to be more involved to provide detailed guidance. Effective board members will have the ability to understand what really goes on in the business and question management about how and why they treat transactions as they do. Boards will also have to perform scenario planning by considering alternatives in light of the new accounting standards and their effect on recording transactions. The changes also will impact the audit committee’s choice of a financial expert. Currently, SOX Section 408 requires this person to understand financial statements and GAAP. The understanding of GAAP requirement could change to an understand
