SEC gives IFRS a solid maybe

Jul 19, 2012

The Office of the Chief Accountant of the SEC continued its noncommittal path by publishing its final staff report on the Work Plan for global accounting standards. The report exhaustively explores the pros and cons of various forms of adopting IFRS. It also includes plenty of cautions that the report doesn’t actually indicate any kind of decision about adopting the international standards or not.

The SEC directed the staff in February 2010 to develop and execute the work plan to help evaluate the implications of incorporating IFRS into the financial reporting system for U.S. companies.

The report notes that outright declaration of IFRS as authoritative in the U.S. was "not supported by the vast majority of participants in the U.S. capital markets.” The report pointed out that industry regulators had concerns about IFRS lacking many industry-specific standards.

In its findings, the SEC staff noted that IFRS had improved in comprehensiveness, but still had some gaps. The report recommended that the IASB rely more on national standard-setters, and noted that the IASB's parent, the IFRS Foundation, needs to shore up its funding and broaden the base from which it is gathered.

IASB responded with disappointment at the U.S. continuing to drag its feet regarding convergence.

“The IASB has started working on a new agenda,” IASB Chair Hans Hoogervorst said in a statement. “The era of convergence is coming to an end. We are revamping our institutional infrastructure to provide for a more inclusive approach to international standard setting. This is the right timing to come on board and participate in shaping the future of global accounting.”

Michel Prada, chairman of the board of trustees of the IFRS Foundation, which oversees the IASB, argued that many of the concerns about IASB outlined in the report had been overcome in other countries.

The IASB has made veiled threats that the U.S. could lose influence within IASB unless it adopts IFRS.

For details on how to submit feedback, visit fasb.org.