Modern accounting and the CFO

When choosing whether to use U.S. Generally Accepted Accounting Principles or International Financial Reporting Standards to file financial reports, many non-U.S. companies listed on U.S. stock exchanges are shrewd shoppers, according to a recent study from the Hebrew University of Jerusalem.

“This research shows that accounting regime selection is not merely a matter of regulatory compliance,” the lead researcher Dr. Heylel-li Biton of the Hebrew University Business School said in a July 2 release on the findings that were published in The International Journal of Accounting. “It reflects calculated decisions by firms to align their financial reporting with operational goals and cost structures.”

Since 2007, it’s gotten easier for so-called foreign private issuers to use IFRS in the U.S. That’s the year the Securities and Exchange Commission eliminated a requirement that FPIs reconcile any reports filed using IFRS accounting methods with U.S.-based GAAP. 

The change was expected to smooth the path for more foreign companies to list their shares in the U.S., to foster cross-boarder acquisitions, as well as to reduce reporting compliance costs, according to a report at the time from the law firm Clearly Gottlieb. 

U.S. GAAP has been a key choice for many filers who have stuck with it over the years. Out of a sample selection of 413 FPIs registered with the SEC from 1995 to 2015 who consistently report financials using the same accounting standard, the majority (325) use U.S. GAAP, 73 go with IFRS and just 15 use a domestic version of GAAP from their home countries, according to the study. 

But a review of a sample of non-U.S. firms who opted to switch accounting standards after the 2007 regulatory change on IFRS reconciliation shows a “significant trend toward IFRS,” with 273 firms transitioning from domestic GAAP to IFRS and 82 from U.S. GAAP to IFRS. 

While the study found that some firms may favor U.S. GAAP because they associate it with lower compliance costs, data indicates firms from capital-intensive industries such as manufacturing and mining prefer IFRS. Of a total of 261 mining FPIs, 127 chose to report using IFRS, 108 went with a form of their country’s GAAP while just 26 chose U.S. GAAP. 

The firms may be choosing a preference tied to rules that affect them. In comparing accounting standard guidance on long-lived assets’ revaluations, IFRS provides “more options to communicate fundamental value; thus, firms with more assets are likely to choose IFRS for the option of implementing fair-value accounting,” the study states. 

But U.S. GAAP may also provide some benefits from an enforcement standpoint because the SEC isn’t as familiar with IFRS, increasing the likelihood that firms reporting with IFRS might be more likely to receive comment letters and requests for amendments, according to the report. 

In recent years the Financial Accounting Standards Board that sets and updates GAAP rules has stepped away from a  push to converge U.S. GAAP with international standards, CFO Dive previously reported. 

State lawmakers in Pennsylvania and Delaware each voted on Thursday to pass their respective CPA pathways legislation, joining a growing number of states enacting new laws to provide alternative routes to obtaining a certified public accounting license and ease the accounting shortage.

After Pennsylvania’s Senate Bill 719 was passed earlier this month in a 49-1 Senate vote, it unanimously passed the House (202-0) Thursday night, advancing to Gov. Josh Shapiro’s desk for signature, according to the state legislature’s website. Delaware’s legislation, (HB 143), was passed and sent to Gov. Matt Meyer with a unanimous Senate vote (21-0) Thursday after the state’s House passed it with 40 votes on June 12, according to the Delaware legislature’s website.

The moves bring the number of states that have passed similar legislation to at least 22. Pennsylvania’s size makes the change particularly impactful, Robert Pawlewicz, assistant professor of accounting at the University of Richmond’s Robins School of Business told CFO Dive. “PA is one of the states [where] a change is a big deal (along with NY, IL, OH, MN and a few others) because states with large cities (like Philadelphia and Pittsburgh) typically have offices from all Big 4 firms and other large national and international public accounting firms,” Pawlewicz wrote in an emailed response to questions.

The votes in Pennsylvania and Delaware come on the heels of North Carolina lawmakers passing similar legislation earlier this week. While CPA pathways bills have stalled in Florida and Maine, the states that have passed legislation have been seeing their bills signed into law, Pawlewicz said. 

“I have not seen a state that passed legislation that a governor has refused to sign,” Pawlewicz said. “Most CPA pathways legislation is passing with overwhelming majorities in both houses for all states. This actually seems to be a bipartisan movement happening pretty quickly (by CPA licensure change standards).”

Like many states’ bills, the Pennsylvania and Delaware legislation are poised to add an additional path to becoming a licensed CPA that provides an option that doesn’t require 150 college credit hours. Proponents of the initiative say the 150 hour requirement is a barrier as it effectively means 30 hours, or a fifth year of post-secondary education, beyond a typical bachelor’s degree. 

The Pennsylvania bill’s alternative route requires a bachelor’s, two years of experience in the accounting field, and passage of the CPA exam. The law retains the existing two options requiring 150 college credit hours or a master’s degree, one year of experience and passage of the CPA exam. It also makes it easier for out-of-state CPAs to practice in Pennsylvania, removing the current requirement that they also obtain a state certificate and permit, according to the Pennsylvania Institute of CPAs. Likewise, Delaware’s bill also offers three paths to licensure, one of which requires a bachelor’s rather than 150 college credit hours, two years of professional experience and passing the CPA exam.  

Keep up with CPA licensure changes with CFO Dive’s tracker on the topic here.

Navigating ongoing economic volatility remains top of mind for CFOs and their fellow C-suite leaders — tariffs, changes in the global economy, and how those shifts could affect the business’ day to day are among the biggest concerns cited during conversations with finance chiefs and fellow CEOs, Christina Ross, CEO and founder of FP&A platform Cube Software said.

The need to keep track of new market shifts in real time underscores a fundamental change in how CFOs and the finance function are approaching planning: “The reality is, we're no longer in a world where planning happens once a year,” Ross told CFO Dive in an interview. “It's constant.”

That planning, however, tends to be spread across multiple platforms; finance teams, for example, “no matter how hard we've tried to pull them out of Excel, are still planning in Excel 99% of the time,” she said. Marketers, on the other hand, tend to want to conduct their budgeting and planning in Google Sheets, while CEOs look to platforms such as Slack, Ross said.

On Monday, Cube, a provider of FP&A software, launched an AI suite of apps aiming to meet business teams on the platforms where they already are — connecting across tools and workflows and utilizing natural language to query and to aggregate information, she said. 

Excavating the finance ‘pyramid’   

The June launch comes after the software provider unveiled a suite of “agentic AI” apps in April for communication in Slack and Microsoft Teams, according to a company announcement. The suite announced Monday includes support for real-time workflows, interactive reporting and the use of natural language, according to the company.

That includes enabling the ability for an FP&A leader, for instance, to build reports in platforms like Excel — still the “lingua franca” of finance, Ross said — and then share them as interactive dashboards with other relevant leaders and teams, such as the CRO, she said.

“That entire workflow would have required one person at the center to manage all these relationships, to manage all the data, to manage all the files, to perform calculations on their own,” Ross said. “This is now all done with a button click at each step.” 

Smoothing the planning process across disparate platforms is critical for today’s CFOs, who are increasingly asked to serve as strategic advisors as well as stewards of capital.

The need for swift and easy planning arises from the challenge of effectively using data: in the hierarchy of finance’s imperatives, strategic finance sits at the top, according to Ross, a self-described “serial CFO” turned CEO. Underneath strategic finance is planning, and “before it is reporting, before that is data,” she said.

Consequently, many of the potential ways AI could aid modern finance chiefs are tied to data, especially “the transaction layer, which is typically what happens before that data gets to finance,” Ross said.

“It is a huge need when we think about the world of accounting and the fact there aren't enough accountants in the world anymore, this is where AI can actually help humanity to both fill the gap and also help take sort of the grunt work out of the land of accounting,” she said.

Part of Cube’s newly announced AI suite includes smart forecasting, for example, which “can take everything from historical data to seasonal transactions and actually predict…what you can expect to see, from everything from revenue to expenses,” Ross said.

Making space for AI

Cube is among several companies that have recently launched AI enabled tools aimed at easing pain points within the finance function — businesses such as Salesforce and Microsoft, for example, have debuted “AI agents” that can help finance employees conduct a range of tasks, CFO Dive previously reported.

As the finance function continues to evolve, technologies like artificial intelligence will likely play a key role — in part, the implementation of tools such as automation software has helped to drive the CFOs’ shift to a strategic leader forward.

“For the last decade plus, maybe it's more like 20 years, automation helped to take finance from the back office to the boardroom, so the world of invoices and transactions and accounting got replaced by machines, and then the conversations could be more strategic in nature,” Ross said.

Automation, however, “doesn’t clean messy data” — which is where AI comes into play, she said. The technology enables finance teams to detangle and make sense of the anomalies or ambiguity that remains, she said.  

It’s still critical to leave room for experienced finance professionals alongside emerging technologies such as AI inside the finance function, however — Ross, for example, tends to think of Cube’s solutions as akin to having an analyst working alongside a member of the finance team.

“It doesn't replace someone,” Ross said of Cube’s suite of AI apps. “It is that analyst sitting next to you saying, here's what I found. You can now go a layer deeper and try and understand the story behind the story.”

Leaving space for experienced finance leaders is especially key when it comes to ensuring data transparency and accuracy: “I want to say maybe a year to 18 months ago, this was the most common topic that we'd hear from our customers and prospects around their concerns around AI,” Ross said of data transparency. Cube’s “AI analyst” can provide a breakdown of where it’s sourcing its numbers to ensure full transparency around the information, she said.

“I think for the finance suite, I think you will still need an expert in every function, but you will likely need less raw head count,” she said of the future of the finance function. “For example, you will always need someone who understands accounting, because even if your AI is doing most of the accounting at the end of the day, what a controller does is, it’s this person assessing and building controls.”

The Financial Accounting Standards Board this week voted for a proposed update to generally accepted accounting principles standards for derivatives to go into effect in less than a year, with all entities required to comply with the new rules for annual reporting periods and interim periods beginning after Dec. 15, 2026, according to the board’s report on a Wednesday board meeting.  

The update relates to the scope of the rules formally known as Derivatives and Hedging (Topic 815) and Revenue from Contracts with Customers (topic 606). The changes are a priority project that the U.S. standard setter undertook after hearing in 2021 that stakeholders found it challenging to determine what transactions were considered derivatives under the current accounting rules. 

Under the update, the derivative accounting rules will not apply to certain ESG-linked financial instruments as well as research and development and litigation funding arrangements. 

The project arose at a time when corporate risk reporting was growing more complex amid the retirement of LIBOR and fluctuating interest rates, CFO Dive previously reported

The way existing derivative standards are written has led to “scope creep,” with some companies treating too many financial instruments as derivatives, FASB Chair Richard Jones said during Wednesday’s meeting. That has obscured the true economic picture of some financial situations, he said. 

“Since 1998 we’ve been fighting this view that more and more things go into the scope,” Jones said. “The natural tendency we’re going to face in practice is people are going to continually try to pull things into the scope of this guidance…and what we’re trying to do as a board is really draw a line and say, ‘No, this stuff doesn’t belong.’” 

During the comment period the proposal drew support from such companies as automaker Ford Motor Co. and pharmaceutical giant Eli Lilly. 

“We support this proposed ASU in relation to research and development funding arrangements in our industry, where payments are contingent upon development milestones or regulatory approvals, as we believe there is existing US GAAP guidance that better aligns with the nature of these transactions,” Donald Zakrowski, Eli Lilly’s chief accounting officer wrote in an Oct. 21, 2024 letter to FASB.

“The scope exception helps to reduce the burden of documentation related to such transactions and additionally prevents the broad definition of a derivative from overreaching beyond what was intended by the Board in its development,” he wrote. 

Move over bitcoin: stablecoins are having a moment as U.S. lawmakers wrangle over legislation and the Trump administration, according to comments last week by Treasury Secretary Scott Bessent, aims to use the digital assets  to ensure the dollar remains the world’s reserve currency.

This month, stablecoins are also getting attention from the American Institute of CPAs, one of the accounting industry’s biggest trade organizations, which has published reporting guidance and criteria intended to bring more transparency and standardization to issuer reports on “fiat-backed” stablecoins. 

The AICPA’s 27-page document, titled “2025 Criteria for Stablecoin Reporting,” is the culmination of a roughly three-year initiative aimed at standardizing the reports issuers put out on the assets, according to Ami Beers, senior director, assurance and advisory innovation at the AICPA. The report is designed to set criteria for stablecoin issuer reports that would give investors a better understanding of how their assets were being handled as well as to provide a framework for CPAs performing attestation engagements.

“Today there is no common framework for stablecoin issuers to report to investors on these coins,” Beers said in an interview. “What we’re trying to get is transparency and for issuers to report some of their policies, how they determine which coins are redeemable, where they’re going to invest reserve assets, and how they reconcile whether the coins outstanding are sufficiently supported by the reserve assets.”

Beers made clear that the AICPA is not issuing accounting guidance to be used by preparers of financial statements and noted that compliance is “voluntary.” Rather, she said it is criteria for a presentation and disclosure framework that creates common, consistent and transparent reporting that can be used in a CPA engagement when accountants provide attestation services, she said. 

The guide is also only focused on fiat-based stablecoins backed by traditional currencies such as the U.S. dollar. Some of the biggest such stablecoins include Circle’s USDC and Tether’s USDT.

The current lack of “uniformity” in the issuer reports make it difficult for investors to assess their stability, according to a March 7 report on the new guidance from BPM, a tax, advisory and accounting firm. Issuers following the new guidance would provide details on such key areas as the total number of stablecoins in circulation, and the types and amounts of assets backing the stablecoin value, the report states.

Beers likens the relationship of the investors to the stablecoin issuers as similar to that of a casino operator and its customers.

“Similar to a casino, you’re going to get your chip, you’re going to go and you’re going to play at all the different tables in the casino but when you get back you want to be able to turn your chip in for a dollar,” Beers said. “And you want to make sure that the casino is holding funds and that you can trust they’re going to be able to repay you that dollar.” 

The new guidance for stablecoins comes just under two years after the Financial Accounting Standards Board issued narrowly-focused accounting standards that required companies to report qualifying crypto assets using the fair market value accounting method. 

There is precedent for the AICPA providing such guidance. The Financial Accounting Standards Board is charged with setting U.S. accounting guidance that underpins generally accepted accounting principles, and the AICPA sets attestation standards for CPA practitioners, according to Daniel Figueredo, an advisory and assurance partner at BPM. At the same time that they often work “iteratively” with one another, he said. 

“While the FASB sets authoritative GAAP in the U.S., it is based on principles that need to be boiled down for practical application,” Figueredo said in an email.

“For example, the AICPA had published guidance on digital asset accounting before the FASB was able to finalize its recently issued crypto asset standard,” he said. “Given the rapid evolution of digital assets and stablecoins the AICPA has taken a proactive role in establishing best practices…FASB may issue formal guidance in the future, until then the AICPA guidance is available to assist in navigating this space.” 

Accounting errors surged to a nine-year high last year, putting scrutiny on the inner workings of the industry and its regulation. High-profile errors have created conversation around the controls and governance needed to support accounting teams as they do their work, but it’s critical for there to be a balance between control and flexibility, said Chris Miller, SVP of product strategy at accounting software provider Netgain Solutions.

“You want to have good controls, but you don't want to have too many controls, or else you grind everything down to a halt, and then you create just as much of a problem,” he said in an interview.

The right scrutiny

The number of U.S. companies forced to withdraw finance statements hit a near-decade high in 2024, with 140 public companies issuing restatements in the first 10 months of the year, the Financial Times reported in December. In a high-profile example of mishaps in the accounting space, retailer Macy’s announced it was postponing the release of its Q3 2024 results after it was revealed an ex-accountant had deliberately hidden more than $154 million in expenses, CFO Dive previously reported.

The flawed bookkeeping of the former Macy’s accountant speaks to growing pressures in the accounting industry, including an ongoing shortage of skilled talent, potential issues with organizational structure and oversight, and pressures for accounting teams to hit critical profitability or growth targets. Often, there’s a perception that the accounting team is responsible not just for monitoring company results, but that they’re “somehow responsible for the results themselves,” Miller said. 

That could contribute to “bad incentives” to overworked accounting teams, he said, if they start to feel pressure to meet profitability or other financial goals.

Such pressures can also lead to less rigid controls, allowing critical checks to slip through the cracks. For example, in the case of the $154 million error at Macy’s, “no one ever questioned the underlying assumptions of the accrual to make sure that it was correct,” Miller said “And that happens all the time without good controls put in place that force you to look at those assumptions and challenge your judgments.”

Miller previously served as director of IT strategy at Englewood, Colorado-based Netgain before departing for Oracle’s Netsuite, where he logged an eight-year term in roles including global finance architect, strategic initiatives, according to his LinkedIn profile. A certified public accountant, Miller’s past experiences also include a term at Workday. He rejoined Netgtain as an SVP in April 2022.

While the prevalence of accounting errors has called into question current governance, a broad tightening of controls could further bog down accounting teams, creating more pressure and contributing to the bleed of skilled talent.

“What we need is really the right scrutiny,” Miller said. That includes “maybe even pulling back some of the wasted oversight and kind of redesigning the flow or the process of how these things actually got done,” he said.

Filtering the noise

To support today’s accounting teams, finance leaders and regulators also need to turn their attention to the ongoing talent pipeline problem. While it’s difficult to draw a direct correlation between a lack of skilled accountant to specific incidents of accounting errors, “there certainly is the second order effects that are coming from that, from there not being people in the pipeline,” Miller said.

New technologies such as artificial intelligence can help support overwhelmed accounting teams, but to address the wider shortage of accountants, the first step is to “lower the barriers of entry so that we can appeal to a wider range of people,” Miller said.

Approval for alternative pathways to CPA licensure has been gaining ground in recent months among accounting professionals, regulators and companies as the talent shortage continues. The governor of Ohio recently signed a bill into law enabling such alternative routes for would-be accountants in the state, a move that follows endorsement for a 120-hour licensure path — as opposed to the 150-hour path — by Big Four accounting firms, CFO Dive previously reported.

When seeking to find and retain talent, it’s also important to understand that the role of the accounting team is changing, Miller said, with professionals becoming more responsible not just for recording or aggregating financial information, but in driving key business insights and strategy.  

Accountants also have more access than ever to a growing volume of data — something that has to be evaluated closely in tandem with their changing roles, he said. It’s crucial for finance leaders to understand “more data doesn’t make better decisions,” Miller said. “The right data does, at the right time, in the right context.”

“Nowadays we're just awash in data, and there's tons of noise, but very little ‘what do we [home] in on and [what] do we really need?’” he said. Focusing in on the wrong data can have lasting consequences for business leaders as well, he said.

“I think it can lead to this false sense of security … because you're breaking everything down to the ninth degree, you're creating this false precision” if you zero in on metrics that don’t actually speak to the true health of the business, he said.

Artificial intelligence agents — tools designed to complete tasks with little or no human supervision — are dominating technology conversations, stealing at least some of the spotlight from generative AI chatbots like ChatGPT.

Software executives like Salesforce CEO Marc Benioff are lining up behind the technology, rolling out big plans for 2025 and beyond, as they imagine a future in which it’s trusted to perform a variety of key workplace tasks across industries.

Salesforce, for its part, is seeking to unleash one billion agents by the end of 2025, Benioff said in an announcement last fall.

While the technology is generating a lot of buzz, some analysts say it may be a while before companies can begin to realize its enormous potential.

Agentic AI offers new opportunities for business leaders but it also poses a host of potential challenges, including the risk of an agent leaking sensitive data or acting based on a “hallucination” or error, according to analysts. For now, at least, this could hinder adoption, particularly in sensitive parts of a business such as the finance department.

“I think the finance function is going to need to take some time to get comfortable with agentic AI,” Mark McDonald, a senior director analyst at Gartner, said in an interview, adding that rapid adoption among finance teams this year is unlikely.

Years, not months  

The consulting group Forrester in a report late last year stated that AI agents, despite being a top emerging technology for 2024, were effectively not ready for prime time, asserting that it would be another two years before they have “any chance of meeting inflated automation hopes.”

In addition, some may be underestimating the complexity of running projects that involve multiple agents working together, according to Assaf Melochna, co-founder of Aquant, an AI company based in New York City.

“There’s a difference between building something for an experiment versus an enterprise-grade system that needs to be bullet proof to avoid error,” he said.

Still, despite agentic AI’s immediate challenges, analysts say it might also be risky for business leaders to completely tune out the noise around the technology.

“With agentic AI, the question is not if, but when,” Deloitte said in a 2024 year-end AI report released this week. “Although the technology is still in its early stages, it is evolving rapidly and will likely become increasingly capable over the next few years.” 

Over the past year, organizations have improved their preparedness for generative AI more broadly when it comes to areas such as tech infrastructure and strategy but have made seemingly little progress on other critical fronts, including risk, governance and talent, the report said.

Chatbots versus agents

The tech industry’s agentic AI push comes amid growing disillusionment over generative AI in the business world as many C-suite leaders grapple with the reality of cost and return-on-investment challenges, analysts say.

For organizations struggling to see the benefits of generative AI, Cole Stryker, a writer who contributes to IBM blogs, writing in an October piece said he sees agents as potentially “the key to finding tangible business value.” 

“It remains to be seen whether the vast sums of money currently being poured into a handful of huge LLMs [large language models] will be recouped in real-world use cases, but agentic AI represents a promising framework that brings LLMs into the real world, pointing the way to a more AI-powered future,” Stryker argued.

Chatbots “can interact intuitively with humans, synthesize complex information, and generate content,” according to a November article published by Deloitte’s Center for Technology Media and Telecommunications. “But they lack the degree of agency and autonomy that agentic AI promises … AI agents don’t just interact. They more effectively reason and act on behalf of the user.”

Microsoft 365 Copilot, a ChatGPT-like tool, can serve as a personal assistant to business professionals by “jumpstarting” creative projects, but an AI agent can go even further, acting as “a virtual project manager” or tackling complex assignments like reconciling financial statements to close books, Susanna Ray, a features writer who produces online content for Microsoft, wrote in a November blog post.

“An agent takes the power of generative AI a step further, because instead of just assisting you, agents can work alongside you or even on your behalf,” she said. “Agents can do a range of things, from responding to questions to more complicated or multistep assignments.”

AI agents can choose a course of action, design a plan, gather relevant data, and employ multiple software tools to complete each step, according to an SAP explainer.

“By learning from evolving information, AI agents improve over time — analyzing feedback, self-correcting errors, and solving emerging problems,” according to the article. “Multiple AI agents can also work together, even coordinating with humans to achieve different tasks.”

SAP supports the policy that a “human should always be in the loop” when agentic AI is used, Walter Sun, global head of AI at SAP, told CFO Dive. He said SAP’s AI agents provide recommendations to users, who decide whether or not to take action. 

While agentic AI models are designed to make decisions and carry out complex sequences of actions, they are not foolproof and can still make mistakes, just as humans do, according to Mark Purdy, managing director of Purdy & Associates, an advisory and thought leadership firm.

“The agentic AI prize could be great, with the promise of greater productivity, innovation, and insights for the human workforce,” he wrote in a December article published by the Harvard Business Review. “But so, too, are the risks: the potential for bias, mistakes, and inappropriate use.”

Organizations were advised in Deloitte’s year-end AI report to prepare for agentic AI by developing a “strategic roadmap” and crafting risk mitigation plans, among other steps.

“[W]hile there are still many challenges to overcome — and technical complexities to sort out — now is the time to start preparing,” the report said.

AI’s ‘staying power’

More broadly, AI remains a top priority for C-suite leaders, despite some of the potential challenges and risks around adoption, KPMG found in a survey released this month.

The majority of corporate executives responding to the poll said they expect AI to “fundamentally” change the nature of their business within a year or two.

And nearly seven in 10 respondents said they plan to invest between $50 million to $250 million in generative AI over the next 12 months, up from 45% in first quarter 2024 poll results.

“The results show the staying power of the technology,” Todd Lohr, head of ecosystems at KPMG’s U.S. advisory division, said in an interview, adding that C-suite leaders have continued down the path of AI investment, by and large.

The coming year brings an opportunity to scale and advance AI capabilities across the enterprise, and a majority of organizations are looking to AI agents to help do so, KPMG said in a release announcing the study. Over half (51%) of organizations are exploring the use of AI agents and another 37% are piloting them, it found.  

But, once again, it will be up to businesses and their leaders to carefully weigh the risks and the benefits of various AI options.

CFOs and CIOs in particular are responsible for working together to ensure the company is aligned with the right projects, Melochna said.

“On the one hand, you have this pressure to invest to avoid falling behind competitors,” he said. “On the other hand, you need to be cautious to ensure you’re investing in the right thing.”