SEC takes another baby step toward IFRS

Call the SEC's most recent statement on IFRS deliberate, or reasoned, or cautious. Just don't call it breaking news.

In a unanimous decision, the SEC has voted to issue a statement supporting the ongoing pursuit of a single set of global accounting standards.

What it didn't do is anything earth-shattering, like set a date for when the United States would join more than 100 other countries in making the switch to IFRS, or at least something similar. Now that would have been big.

Instead, WebCPA's Michael Cohn reports that the SEC will wait to hear on progress toward a number of milestones, "including convergence of U.S. GAAP with IFRS and improved governance of the International Accounting Standards Board." Commissioners will decide in 2011 whether to move forward on a path toward IFRS.

While supporting what it called the SEC's "thoughtful and concrete steps," the AICPA issued a statement that makes clear its belief that the U.S. must move toward a single set of standards. As one profession insider said recently, "The SEC needs to circle a date."

The SEC's statement might not be a complete snoozer, though. On the Resources Global Professionals blog, Colleen Cunningham makes an interesting point:

"The gameplan and the roadmap is now 'owned' by the current group of SEC commissioners," writes Cunningham, Resources Global Professionals' managing director of finance and accounting. "The previous roadmap was issued under (former) SEC Chair Christopher Cox. This reaffirmation -- issued under current SEC Chair Mary Shapiro -- effectively becomes hers. This was an important step toward moving the issue forward."

A deliberate, reasoned and cautious step, but a step nonetheless.

Check out these related resources:

• Six reasons IFRS might not happen (soon)
• Understanding IFRS (a May 7 Capital Area Chapter program)
• MACPA spring town hall meetings / professional issues updates

Related on-site learning options:

• Are You Ready for IFRS? Moving Beyond the Basics
• IFRS vs. GAAP: The Differences That You Need to Know
• International Financial Reporting Standards (IFRS)
• International Financial Reporting Standards (IFRS) From 5,000 Feet
• IFRS: An Overview of the Looming Change to Global Standards
• International versus U.S. Accounting: What in the World is the Difference?
• The Coming IFRS Conversion: Preparing for the Ultimate GAAP Makeover
• The Impact of IFRS and Other Global Standards on Private Entities

Relate books:

• IFRS: Practical Implementation Guide and Workbook
• IFRS 2009: Interpretation and Application CD

Comments

[Peter A. Margaritis, CPA, MAcc]

The news from the SEC yesterday was not earth shattering, it was still a commitment by the Shapiro administration to the converging of US GAAP and IFRS that was originally the SEC proposed in November 2008, with a slight modification. The original SEC roadmap, there was a timeline of 2011 to make the IFRS transitioning determination. This date, although not concrete, has not changed. The milestones set out in the original plan are for the most not changed. What did change is that the mandatory implementation date for large accelerated filers has been pushed back one year from 2014 to 2015. This should not be a surprise because of a couple of reasons. The change in administration, the economic crisis, and the overwhelming comment letters stating that companies will need more time.

I have always believed that this process is more about converging standards than adopting IFRS. The original goal set out between the FASB and the IASB in the Norwalk Agreement was toward convergence of IFRS and U.S. GAAP, not the adoption of IFRS. The convergence of standards has been put on a fast track because of calls from the G20 and this can be seen on the IASB project page. Many of the joint projects are set for converged standards by 2011.

The SEC established a work plan team that will issue it’s first report by October 2010. This will be the group to keep an eye on this coming year because they will be the pulse of when a “date certain” is set.

I do believe that we will ultimately have one set of high quality, country-neutral standards that will be used globally, including the U.S., in the next 3 - 5 years. It will just take a little longer than many wish.

However, that doesn’t mean that we should put off the process of IFRS education until the “date certain” has been set. During this time, we as CPA’s need to become bi-lingual because we will be dealing with IFRS sooner than we think. For example, a German company gains “control” of a US company and the U.S. company has to consolidate it’s financials into the German parent company. The U.S. company will have to adopt the same accounting policies (IFRS) as its parent. This adoption is usually done in a very short time frame. This situation is happening more and more today.

What if this happens to your client and you don’t have the knowledge to assist them in their transition to IFRS? That client will find a firm who has the knowledge and expertise. Or think about the other side of this situation. You could begin to develop a new line of business in IFRS consulting so you can be the firm that new client seeks.

In conclusion, being bilingual today might just be the right business move for you to make while the SEC goes through their due process.

[IFRS]

I really enjoyed your article. You bring up some great points. Thank you.