The NASPP Blog

The SEC released a Statement last Wednesday addressing many of the concerns raised during the comments period for the proposed Roadmap for transitioning U.S. issuers to a high-quality global accounting standard, presumably IFRS. Although the SEC confirmed its commitment to an impending convergence and adoption of a single set of global accounting standards, the SEC really appears to have taken a serious look at the potential impediments to adopting IFRS as a single global accounting standard.

More Time

In the 2008 proposed Roadmap, the SEC set 2011 as the date when a determination will be made on the viability of adopting IFRS for U.S. issuers; and last week’s Statement keeps 2011 as the target date for that determination. What has changed is that the original Roadmap would have required, should the 2011 determination be made if favor of transition, the adoption of IFRS starting in 2014. This date is pushed out to 2015 as the earliest adoption date (pending the determination).

Preparing for a Determination

The milestones set by the proposed Roadmap are still in place as a baseline requirement for the SEC to make its 2011 determination. In addition, the SEC Statement stresses that convergence between FASB and IFRS will be an essential step in preparing for a determination. What this new Statement expands on is additional preparation by way of a Work Plan designed to position the SEC to make a solid determination. This Work Plan clearly reflects the SECs commitment to addressing concerns raised in the comments on the Roadmap. The Work Plan delves into analyzing the viability of IFRS as a high-quality global accounting standard and also evaluating the potential benefits and costs associated with U.S. adoption. Specifically, through the Work Plan, SEC staff will strive to:

• Determine if IFRS is sufficiently developed and consistently applied;
• Ensure that global accounting standards are independently set and are for the benefit of investors;
• Provide investor understanding and education on IFRS;
• Examine how a change in accounting standards will impact U.S. regulatory environment;
• Determine full impact on issuers (both large and small);
• Establish the readiness of U.S. financial statement preparers and auditors to make the conversion to IFRS.

Reactions

Although concerns over the viability of IFRS adoption in the U.S. are still prevalent, there is a general consensus that an international accounting standard is desirable, even inevitable. The Work Plan outlined in the SEC’s Statement was well-received, even if there are still major roadblocks to be overcome. There’s a lot to be done before next year’s determination is made to get not only the SEC, but also U.S. issuers and investors ready!

In a prepared speech, SEC Commissioner Luis A. Aguilar expressed some concerns around IFRS, including potential discretion afforded to financial statement preparers under IFRS, the ability to audit and enforce IFRS-based accounting standards, and whether or not adopting IFRS is ultimately in the best interest of investors.

The AICPA issued a statement supporting the move to a global accounting standard, but also urging the SEC to provide a certain date for IFRS adoption.

In a press release, CAQ Director Cindy Fornelli expressed her support and commitment to work with the SEC on carrying out the Work Plan.

FEI issued a statement applauding the SEC for developing the Work Plan.

More Information on IFRS

Although the SEC isn’t ready to say for certain if IFRS will ultimately be the “high-quality global accounting standard” that both the Roadmap and the Statement call for, it is certain that continued convergence between U.S. GAAP and IFRS will be ongoing. In addition, U.S. companies with overseas subsidiaries may need to adopt IFRS before any general transition, at least for the subsidiary. If you want to learn more about IFRS, check out our recorded webcast, “The Race to IFRS-Don’t be Left Behind”, the “IFRS–A Lesson in Implementation” session materials from our 2009 Conference (under Accounting, Auditing and Controls), and Deloitte’s guide to IFRS posted to our Document Library.

-Rachel