News Highlights for July 2010
While FASB and the IASB work to complete an unprecedented 11 standards over the next 14 months, SEC Chief Accountant James Kroeker told the JofA in April that he would support the boards’ cutting the number of projects due in June 2011, provided there was good rationale for a delay.
“June 30, 2011, is an arbitrary deadline, and it’s not one that’s been put in place by the SEC or by our road map,” Kroeker said. Citing FIN 46(R) as an example of an accelerated project that later needed to be reworked, Kroeker said that what’s most important is to ensure through the exposure process that the final standards are a “long-term, sustainable solution.”
Kroeker made his comments in a JofA exclusive interview.
Financial instruments and lease accounting are the two projects Kroeker suggested should remain atop the boards’ priority list. Others, such as financial statement presentation, could be completed through a more gradual process, he said.
Asked specifically about revenue recognition, Kroeker said that while he could see room for improvement to the industry-specific approach in U.S. GAAP, he didn’t see revenue recognition as the highest priority right now.
Kroeker said that, although he doesn’t see convergence as the only potential path for IFRS to become sufficiently developed and consistent in application for use as the single set of accounting standards in the U.S. reporting system, convergence is “critical for these [Memorandum of Understanding] projects.”
When asked about the SEC staff’s IFRS work plan, unveiled in February, Kroeker emphasized that the SEC staff will provide public updates on its progress, with the first report due out by October. He said that rather than setting “go or no-go” thresholds, the work plan’s intent is to compile a body of knowledge from which the SEC staff can make sound recommendations to the commission.
Complex GAAP standards that have been introduced over the past few years too often do not help users of private company financial statements, and in those cases, the benefits don’t justify the costs associated with complying with those standards, according to many of the panel members and guests who testified at the meeting.
Some panel members and guest speakers expressed concern about the consequences that might surface if a completely separate set of standards were to be introduced for private companies.
“Adding dual standards into the mix could put undo strain on users to learn new standards and revise their systems for analyzing data,” said William Schramm, of PricewaterhouseCoopers, who was a guest speaker at the meeting.
“A better approach may be to devote resources for simplifying complexities for all companies—public and private,” Schramm said.
Another point that surfaced was the ability to give private companies the choice of whether they want to comply with a separate set of standards or to report as a public company under U.S. GAAP, regardless of the size of the company, especially those with an eye on going public.
“I’m comfortable with the market making the decision of private company GAAP and public company. Then we don’t have to deal with the issue of size complexity,” AICPA President and CEO Barry Melancon said. “As long as we don’t put a requirement that a private company must use private company GAAP, we put the power in the hands of the users.”
The 18-member panel, which was announced in December as part of a joint effort by the AICPA; the Financial Accounting Foundation, FASB’s parent organization; and the National Association of State Boards of Accountancy, will hold its third meeting July 19 in Chicago. The goal of that meeting will be to narrow down the list of alternative structures, Anderson said.
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