Would I Offer IFRS Financial Statement Prep Services?

When I was on the staff at KPMG there was a story about one of our big public clients getting ready to issue their quarterly financials that showed them missing their eps forecast by $.01.  The client was very distraught over all this because they were afraid their stock would tank, and they let their fears be known.  The engagement partner and the MP of the office didn’t have any answers for them, but our top technical guy for the western region did.

“Why don’t you just change your depreciation method,” he said.

They did.  The company picked up a penny or two per share, they met their forecast and the world was saved.

And the point of the story as it made its way around the office was “we were the heroes.  Sam’s a genius.”  Both of those conclusions are true, by the way.

Of course the client would view us as heroes.  In their mind, that’s exactly what they pay us for.  That’s why you pay your tax accountant, right?  To make sure you pay the lowest amount of taxes under the law.  Isn’t that why you would hire a CPA firm to do your financial statements?  To make sure the FS portray your company in the most favorable light allowed.

You don’t want to lie on your tax returns and you don’t want to commit financial fraud.  But you don’t want to be a sap either.

IFRS is the “why don’t you change your depreciation method” approach on steroids. If you thought it was fun to play with numbers before, wait until you get a look at IFRS for SMEs.

Right now, people are thinking that the preparer community will be driven to adopt IFRS for SMEs because it’s so much simpler than GAAP.  Instead, it should be the CPA firms driving their clients to adapt IFRS because it makes their financial position and results of operations look so much better.

I couldn’t do this because to me it seems cynical.  My dad could have totally done this, though because to him it seems like client advocacy.

For a firm with the right mindset and the right set of skills starting an IFRS practice could be very lucrative.  Call it results-oriented accounting.  Show the company their prior year GAAP financial statements and put these alongside IFRS financial statements from the same year.

Which one looks better?  Which one would you rather take to the bank?

It’s all totally above board, totally legal.

It makes me uncomfortable to offer a service like this, but if you’re in the client advocacy camp, then go for it.

The firms that figure out how to provide this IFRS conversion service will be seen as heroes by their clients, which sounds like a pretty profitable business proposition to me.

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