Those waiting for clarity from the SEC regarding its road map for adopting International Financial Reporting Standards in the U.S. are still waiting following a speech by the agency’s chief accountant Monday.
In an October speech, Chief Accountant James Kroeker said the Commission would provide greater clarity on the future of its proposed road map by Dec. 21. In his speech Monday at an AICPA conference in Washington, he gave few additional details, but added, “You can expect to hear more from us in the short term.”
However, during a question and answer session, Kroeker addressed issuers’ concerns over whether they should invest in making changes to their systems. “It’s something that I think you can all expect we’re taking very seriously,” said Kroeker. “If, for example, there was a determination about a date, I don’t think you’re going to wake up in the morning and realize that date means you suddenly have to convert tomorrow to IFRS.”
Kroeker emphasized that the effect on investors would take precedence over other concerns in the SEC’s decision process. “I believe the fundamental focus of our evaluation of implementing a single set of high quality standards must be on the impact to investors,” Kroeker said. “I believe that implementing a set of global accounting standards for U.S. issuers can and must be done only in a manner that is beneficial to U.S. capital markets and consistent with the SEC’s mission of protecting investors.”
While acknowledging that there was no clear consensus on how to conduct the transition, Kroeker highlighted “widespread and strong support” from investors and issuers for U.S. publicly-held companies to migrate to a single set of global accounting standards.
He went on to outline SEC considerations that had similarities to milestones laid out in the SEC’s proposed road map including:
Carefully and fully assess U.S. investors’ understanding of and perspectives on IFRS;
The development and application of IFRS, particularly for its use as a single set of standards within the U.S. capital markets;
The impact on the U.S. regulatory environment;
Preparer considerations including changes to accounting systems, changes to contractual agreements, corporate governance considerations and litigation contingencies;
Human capital readiness; and
The role of the FASB in achieving the goal of a single set of global standards.
He emphasized the fundamental nature of changes currently being made to both IASB and U.S. GAAP under the boards’ Memorandum of Understanding (MoU) which identifies major projects due to be completed jointly by June 2011. “If revenue recognition is going to be changing and the platform in the U.S. and the platform under IFRS is changing, I don’t know how an entity would go about putting a system in place to adopt IFRS.”
But he seemed to indicate that the Commission does not plan to wait until after FASB and IASB complete their MoU projects before providing more clarity on its intentions. “That doesn’t mean people don’t need or want a greater level of clarity; I said earlier you can expect to hear more from us in the short term.”
But Kroeker said that regardless of future action by the SEC he believes it is important for “FASB to continue to work closely with the IASB to raise the quality of financial reporting standards in the U.S. and around the globe.”
—Matthew G. Lamoreaux (firstname.lastname@example.org) is a JofA senior editor.