Lack of convergence delays SEC’s IFRS decision
The SEC’s chief accountant explained on Monday why the organisation has had to put back its decision on whether or not International Financial Reporting Standards should be adopted in the US.
.James Kroeker told an accountants’ conference in Washington, DC that the SEC would not be in a position in 2011, as scheduled, to decide whether or not the US should adopt IFRS because the convergence agenda of the Financial Accounting Standards Board (FASB), a US body, and the International Accounting Standards Board (IASB) was running late.
The SEC's chief accountant said that his organisation had made it clear in February 2010 that completion of the convergence projects was a criteria in its consideration of IFRS. The IASB website states that 20 jurisdictions, including Australia, Canada, China and the EU, around the world either require the use of the international standards or will do so soon.
Kroeker commended FASB and IASB for listening to those who advised them that more time was needed for the convergence agenda to be completed.
“The Boards, wisely in my view, also agreed that a number of projects would be delayed even further to allow for a sharper focus on a smaller number of key MOU projects and to allow for a phased approach to the issuance of exposure drafts and the resulting final standards.
“Success in this endeavor should and will be measured not by the precise timing of completion of any of the given projects, nor should it be measured by whether the timing was delayed to provide for a phased approach to issuance of an exposure draft. Instead of focusing on a few additional sands of time, I believe success should be, and ultimately will be, measured by the quality of the resulting output.”
Kroeker explained that the boards had made progress. For example, convergence standards had been agreed this year on increased transparency related to items reported in Other Comprehensive Income and how fair value should be determined for financial reporting purposes, and similar standards on revenue and leasing were getting closer. However, he said it was not possible to say when the financial instruments project, which has run into difficulties over an impairment model, would be completed. Hedging and offsetting are other topics under discussion for convergence.
Staff from the SEC are completing a work plan to set out how the commission could and should go forward with making a decision on IFRS.
“The staff will need a measure of a few additional months time to produce a final report. At the same time, the staff is in the process of developing an approach for Commission consideration,” Kroeker said, adding that a framework for adoption should:
Demonstrate a high level of support for US commitment to continued development and use of global consistent high quality accounting standards;
Provide both in fact and in substantive operation clear US authority over standards applicable in the US capital markets;
Provide for and facilitate a strong US voice in the process of establishing global accounting standards;
Be responsive to the economic and other impacts of change; and
Consider whether to retain US GAAP as the basis for US financial reporting, thereby mitigating the costs and complexity of introducing a new set of standards under regulatory regimes, contractual documents, and U.S. laws under which compliance with US GAAP is often specifically contemplated.