The SEC will allow public companies a minimum of four years to adjust if it decides to mandate the use of IFRS, SEC Chairman Mary Schapiro said Monday.
The remark came in response to a question from the audience at the AICPA’s National Conference on Current SEC and PCAOB Developments in Washington.
Additionally, while the commission still plans to vote next year on whether to require the use of IFRS, it is “not committed to a June 2011 decision date … despite a common [misconception by the accounting] profession,” Schapiro said.
In February the SEC unanimously approved a new timeline that envisions 2015 as the earliest possible date for the required use of IFRS by U.S. public companies if it decides to move ahead with a mandate.
While affirming the commission’s desire to keep moving toward IFRS adoption, the new timeline offered issuers some breathing room from the 2014 deadline originally spelled out in the proposed road map the SEC unveiled in 2008.
The jury is still out on whether the SEC should require IFRS and what would be the best approach for making the switch if it does, however.
“I haven’t reached a final decision on whether U.S. capital markets should move to IFRS,” or the best approach for making the switch if required, Deputy Chief Accountant Paul Beswick said in prepared remarks Monday at the conference “The majority of jurisdictions are following the convergence or endorsement approach. The U.S. should move to something in between–‘condorsement.’”
Under this method, U.S. GAAP would continue to exist and the International Accounting Standards Board (IASB) and FASB would continue to work on their convergence projects. Additionally, FASB would work to converge existing GAAP to IFRS over a period of time for standards that are not on the current convergence agenda. This would help to ensure existing standards are appropriate for U.S. companies on a standard-by-standard basis, according to Beswick. Then when the IASB issues new standards, FASB would decide whether to incorporate or endorse [but not require] them.
“This is a method of incorporating a single set of standards into the U.S. market but provides mechanisms to make sure they are high quality before they are introduced,” Beswick said, “A big bang adoption date requires serious consideration about whether [those standards] are necessary. If [the date is later than] June 2011, I would be supportive.”
It is also important to weigh the costs and benefits of switching to IFRS, especially for small public companies and private companies, he added.
An increasing number of AICPA members have international business dealings, and are already using IFRS, AICPA Chairman Paul Stahlin said in his keynote address Monday.“I, myself, have many customers with less than $20 million in sales that have a vendor, a supplier, or a customer – and sometimes all three – located outside the United States.”
He highlighted results from the AICPA’s October 2010 IFRS Readiness Survey, which showed 33% of CPA respondents said they have at least some knowledge of IFRS, an increase from 26% in October 2008. Fifteen percent reported having no familiarity with IFRS – down from 30% two years ago. Almost half – 48% – of respondents said they are delaying preparation, and 38% indicated they are delaying implementation while waiting for the SEC to decide whether and how to mandate the use of IFRS.
Members are split about the pace of change for FASB-IASB convergence, according to the AICPA survey, with 37% saying it’s too fast, 33% saying about right, and 25% unsure. Less than 5% said they think convergence is moving too slow.
FASB and the International Accounting Standards Board (IASB) released a convergence progress report in November that said their priority projects are on target for completion by June 2011 or earlier. (For recent JofA coverage of the FASB-IASB convergence project, see “Convergence Milestone,” Aug. 2010, page 26.)
The priority projects, which were identified in the boards’ June 2010 progress report, include:
Joint projects on financial instruments, revenue recognition, leases, the presentation of other comprehensive income, and fair value measurement; and
For the IASB, improved disclosures about derecognized assets and other off-balance-sheet risks (aligning with recently issued U.S. GAAP requirements), consolidations (particularly in relation to structured entities) and its project on insurance contracts.
For more information on the progress report, read “FASB, IASB: Convergence Priorities on Target for June 2011.”
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