Angelos Pangratis discusses EU-U.S. trade and international accounting standards. CLICK HERE or on the photo above for the video.

A leading accountant told GlobalAtlanta there could be one worldwide accounting standard within five years and U.S. accountants might be unprepared for the transition.

Gary Illiano, a partner in charge of the accounting and auditing practice at Grant Thornton LLP, the U.S. subsidiary of Grant Thornton International, said that many American accountants will not learn the international system until the U.S. Securities and Exchange Commission, or SEC, makes it mandatory.

A recent study by the firm, which has offices in Atlanta, 49 other U.S. cities and 110 countries, found that 75 percent of the 222 U.S. chief financial officers polled have no experience in complying with international accounting standards.

The U.S. has used generally accepted accounting principles, or GAAP, since 1973, while international financial reporting standards, or IFRS, have become increasingly popular since their adoption by the European Union in 2005.

“At the last count (IFRS) is accepted in 109 countries.  Within five years it could be the standard in 150 countries,” Mr. Illiano said.  “The U.S. is going to be standing alone if we don’t make this move to IFRS.”

He added that U.S. and EU lawmakers are working toward merging the two systems, which currently requires companies with operations in both places to report earnings under different accounting processes.

Angelos Pangratis, deputy head of mission at the European Commission’s embassy in Washington, predicted progress on merging the systems this year in a video interview with GlobalAtlanta May 9.

Last year, the SEC ruled that foreign companies could use international standards and not the accounting principles. “That immediately raises the issue of, if IFRS is good enough for a foreign company, why not a U.S. company, if they determine IFRS is better for them?” he said.

Mr. Illiano added that the commission is likely to set up a voluntary program for companies to use international standards this year, then to make that system mandatory within five years.

The conversion process from one accounting system to another can be expensive, including costs for re-training accountants, buying and installing new software and training people in its use.

“It will be a challenge and a struggle for some,” Mr. Illiano said.  “The experience of Europe in 2005 was most CFO’s waited until they absolutely had to start (using IFRS).  As a result, it wasn’t all that efficient when they got around to the start date.”

The conversion process is necessary for large companies with operations outside the U.S., but when it becomes mandatory it could prove most expensive for small businesses without the resources of bigger firms.

Mr. Illiano said that U.S. companies can lessen the stress of converting to the international system by establishing committees to examine how a new accounting standard would affect their businesses.

He suggested using the two systems at the same time for about two years, in order to learn the similarities, differences and possible problems.