Although full adoption of IFRS in the United States continues to face long odds, understanding IFRS remains important for U.S. investors and companies, SEC Chief Accountant Wes Bricker said Monday.
At the AICPA Conference on Current SEC and PCAOB Developments in Washington, Bricker said it’s important for participants in U.S. capital markets to continue to monitor the quality of IFRS, partly because he said that as of Sept. 16 about 525 foreign private issuers with a combined market capitalization of approximately $7.3 trillion were able to file IFRS financial statements with the SEC without reconciliation to U.S. GAAP.
He said many U.S. companies, especially those with global operations, also have an interest in the quality of IFRS.
“For example, U.S. companies frequently look abroad for potential targets and investees that use IFRS,” Bricker said. “In addition, U.S. multinational companies with foreign subsidiaries may be permitted or required by other countries to apply IFRS for statutory financial reporting requirements for their non-U.S. subsidiaries.”
U.S. companies also do business with non-U.S. companies and other stakeholders who are required to use IFRS financial statements, Bricker said. And others prepare management information using IFRS.
For the foreseeable future, though, Bricker said he believes FASB’s standard-setting process in U.S. GAAP will continue to best serve the needs of investors and other financial statement users.
Momentum for the use of IFRS by U.S. public companies was building in 2008, when then-SEC Chairman Christopher Cox announced a proposed, multiyear plan that set the basis for considering the use of IFRS by IFRS issuers.
But momentum slowed following the release of a 2012 SEC report that questioned the funding of the International Accounting Standards Board (IASB) and the timeliness of responses to widespread accounting issues by the IFRS Interpretations Committee. The report also said adoption would be costly for U.S. public companies.
Although the buzz about full adoption of IFRS has subsided in the United States, Bricker said it’s worth continuing to consider an idea suggested as a possibility by his predecessor, James Schnurr. That idea would permit U.S. public companies to file optional supplemental information in IFRS along with their U.S. GAAP financial statements.
“I continue to think it’s a good idea … but I can’t predict the priorities of the commission,” Bricker told reporters after his speech.
Bricker was promoted to the chief accountant role permanently on Nov. 22, when the SEC announced Schnurr’s retirement. Bricker had been serving in an interim role as Schnurr recovered from injuries suffered in a bicycle crash.
In his first public speech in his permanent role, Bricker said it’s important for FASB and the IASB to continue to collaborate, as their cooperation in recent years has brought areas in IFRS and U.S. GAAP financial statements much closer together for some key transactions.
And he said the interconnectedness of the global marketplace has created a need for IFRS fluency in the United States.
“Knowledge and understanding of IFRS, including similarities and differences between U.S. GAAP and IFRS, are highly relevant to stakeholders evaluating transactions and related financial reporting obligations,” he said.
—Ken Tysiac (firstname.lastname@example.org) is a JofA editorial director.