An SEC decision on the use of IFRS by U.S. public companies is still a “few” months away, SEC Chief Accountant James Kroeker indicated Monday.
At an IFRS Advisory Council meeting in London, Kroeker declined to get more precise because he wants the SEC staff focused on completing a report on the issue rather than on a deadline.
“I’m hopeful that we’re on track for a few months’ time,” Kroeker said. “I’m not going to get more specific about exactly what ‘a few’ means. It’s something more than a couple and less than many.”
In December at the AICPA National Conference on Current SEC and PCAOB Developments, Kroeker said the staff needed at least a few more months to produce a final report that would position the SEC to decide on IFRS. He said Monday that the staff is presently writing that report, which he said will be made public.
Kroeker said that the SEC has moved away from the term “condorsement” to describe a possible method for incorporation of IFRS, should it occur. The term was coined by SEC Deputy Chief Accountant Paul Beswick, who described how condorsement would work in a speech at the AICPA Conference on Current SEC and PCAOB Developments in December 2010.
“It’s probably not a good idea to continue to make up words,” Kroeker said Thursday.
He said the term had led people to mistakenly believe the SEC envisioned a continuation of the convergence process as it stands today, with FASB and the International Accounting Standards Board (IASB) jointly deliberating ideas to come up with an improved and converged solution.
Instead, Kroeker said, the SEC is using the term “endorsement” to describe a system in which FASB would look at IFRS standards and consider how to implement and incorporate them in the United States.
He said whether to retain the idea of U.S. GAAP in an IFRS incorporation framework also remains an issue to be decided if the U.S. moves ahead with IFRS.
“U.S. GAAP is embedded in our system throughout multiple levels of federal, state [and] local regulatory requirements, including embedded significantly in private party contracts, so that even moving away from the term ‘U.S. GAAP’ would be exponentially compounding to a decision,” Kroeker said.
Kroeker said FASB and the IASB have made progress on major convergence projects. But he said there is still tension on some issues in the financial instruments project that could affect the SEC’s decision on whether to adopt IFRS.
“If you think about a standard that was widely divergent, it would put us in a much more difficult situation to say, ‘Well, we are going to move forward with some form of adoption or incorporation, yet our national standard setter has in its own best judgment concluded differently on financial instruments,’ ” Kroeker said. “So the more progress we see there, the easier that will make a decision.”
Kroeker reiterated his previous statements that, if IFRS were adopted in the U.S., ultimate responsibility for financial reporting standards in the U.S. would rest with a U.S. authority; Kroeker prefers for FASB to assume that role. He said the U.S. also would need to have a strong voice in the development of standards.
—Ken Tysiac ( firstname.lastname@example.org ) is a JofA senior editor.
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