Some of the excitement (on the part of accounting firms) and anxiety (on the part of publicly listed U.S. companies) surrounding the IFRS conversion is the frequent comparison of this pending requirement to the Sarbanes-Oxley Act.

Many experts have offered this comparison, and I’ve certainly cited a few of them. However, there are several reasons the SOX-IFRS comparison misses the mark, and they’re important to keep in mind.

Kevin Woods, a senior consultant with Accounting Management Solutions, Inc., says there are actually “very few” similarities between SOX and IFRS.

“SOX was an act of the U.S. Congress in response to well-publicized abuses by corporate executives,” Woods explains. “SOX added a significant layer of compliance procedures meant to prevent similar abuses.”

In contrast, IFRS is a set of accounting principles designed to bring greater standardization to financial reporting in our increasingly global business world. “IFRS is meant to simplify and streamline the accounting and reporting process not only in the United States, but also in all other countries wishing to comply,” Woods adds. “When applying IFRS principles, a management team needs to rely on its judgment and industry best practices. IFRS implementation should not be as costly or as complex as SOX.”

The last point is refreshing (for publicly listed companies). ###