Comment letters to the SEC revealed support for the idea of global standards but that further progress on convergence is desired before IFRS is incorporated in the United States, according to a key SEC official.
In written remarks, SEC Deputy Chief Accountant Paul Beswick said the goal of a single set of high-quality, globally accepted accounting standards received strong support from those commenting on a May staff paper titled Exploring a Possible Method of Incorporation. But comment letters showed an interest in further progress on the joint standard-setting projects of FASB and the IASB before IFRS is adopted as the U.S. standard.
Beswick was unable to speak as scheduled Monday before the AICPA National Conference on Current SEC and PCAOB Developments in Washington. The SEC released the comments he prepared for that speech, which provide further information on the progress of the SEC’s decision on whether or how to incorporate IFRS in the United States.
Beswick said that two key reports should be published in December that should provide a clarified, enhanced governance structure supporting the IASB. The IFRS Foundation Trustees and the Monitoring Board created by the foundation are preparing separate reviews of the governance and strategy for the Foundation.
A decision on IFRS from the SEC is unlikely to come for several more months. SEC Chief Accountant James Kroeker said Monday that the SEC staff needs more time to complete its final report on the international standards.
Beswick hopes the SEC staff will release its final report on IFRS “as soon as practicable in 2012.” Since 2008, the SEC has been considering adoption of IFRS for U.S. issuers in order to provide consistency in an increasingly global economy.
According to Beswick’s prepared remarks, commenters on the SEC work plan on IFRS supported the general premise of an endorsement mechanism for incorporating IFRS that was described in the May staff paper. He said the letters indicated that FASB should act as the endorser of new IFRS rules on a standard-by-standard basis.
“An often-provided rationale was that the FASB is best positioned to act in the interest of U.S. investors and the U.S. capital markets,” Beswick said. “Commenters felt that the FASB’s expertise and long track record of producing high-quality accounting standards would be a positive influence on the quality of IFRS.”
Views varied, according to Beswick, on how high the threshold should be for FASB’s endorsement of IFRS standards under that model. Some commenters wanted more discretion for FASB than the limited role described in the May staff paper; others said the benefits of adopting IFRS would decrease if FASB frequently declines to endorse IFRS standards.
Beswick’s remarks explained that commenters aren’t unanimous on adopting IFRS. Some are concerned that incorporating IFRS will be costly and will provide no benefits to companies or U.S. markets. Some are concerned about the quality of existing IFRS standards.
Some are asking, according to Beswick, whether there ever will be a truly global accounting standard if FASB or other jurisdictions have the ability to deviate from them. But, he said, “jurisdictional approaches to IFRS already are diverse, and rarely are direct to IFRS without an incorporation mechanism.”
“Would it be better to be 90% converged and understand the differences, or should the objective be abandoned?” Beswick asked.
The SEC’s answer is at least a few months away.
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