IFRS Blog

SEC Breaks Silence on IFRS

For those waiting on the status of the SEC's IFRS roadmap, last week brought big news. Speaking at two separate gatherings, SEC chief accountant James Kroeker said the roadmap would be an important priority this fall. Chairwoman Mary Schapiro, speaking to a group at Georgetown University McDonough School of Business, said it would be ideal to have a single set of high-quality global accounting standards and we should hear something later this fall about the Commission's expectations with respect to IFRS.

This week, leaders from the G20 nations will meet in Pittsburgh. In previous meetings, G20 leaders have called for significant progress toward a single set of global accounting standards. This meeting will be especially interesting, given pressure from the banking industry and European officials on the direction standard setters are taking on fair value reform. Recently, the French Finance minister urged rejection of IASB proposals on fair value reforms if the IASB does not make changes. Both James Kroeker and Mary Schapiro have expressed concerns that accounting convergence, especially a rush to convergence, can create a race to the bottom.

There are tremendous crosscurrents now. While many expressed support for movement toward a single set of global standards in comments on the SEC roadmap, Mr. Kroeker said many were “fairly downbeat” about being able to adopt IFRS in the near term. However, the time left for more convergence seems limited. The Federation of European Accountants has called on the IASB to end its convergence program with the United States. Sir David Tweedie, chair of the IASB, said continued convergence would be difficult after 2011 if the U.S. does not commit to IFRS by 2011. Earlier this year, Financial Accounting Standards Board chairman Robert Herz said that convergence of both sets of standards could take 10 to 15 years.

Until last week, these debates have been occurring with little insight of when the SEC might take action on its roadmap. Now we know. I wonder which direction the SEC will take us. What do you think will happen?

- Paul Parks | www.IFRS.com

Waiting on the SEC.

In a recent speech at the American Accounting Association annual meeting, Sir David Tweedie, chairman of the International Accounting Standards Board, asked, "Where is the USA?". He warned that if a commitment to IFRS does not come from the U.S. by 2011, he thinks it will be impossible to continue convergence efforts with the U.S. after that date. The IASB is also under pressure from the Federation of European Accountants to end the convergence program with the U.S.

The leaders of the G-20 nations earlier this year called for substantial progress toward a single set of global standards. President Obama reiterated this position in his regulatory reform proposals in June. Officials in the U.S. and Europe do not seem to be listening. In Europe, the EU Commissioner for the Internal Market and Services is reported to have not signed a key document, which supports the Monitoring Board of regulators that oversees the IASB's parent, the IASC Foundation. Pressure from both European and U.S. politicians have the FASB and IASB heading in different directions on fair value reforms, at least in terms of timing of forthcoming proposals.

The SEC, however, holds the key to the G-20's and President Obama's call for one set of global standards. Without the world's largest capital market – the U.S. – there are no global standards for public companies. Delay in SEC action on its roadmap for the adoption of IFRS is having a serious affect on the global convergence movement.

In their comment letter to the SEC, the U.S. Financial Accounting Foundation and FASB supported a call for a comprehensive study by the Office of Chief Accountant on the implications of implementing IFRS in the U.S. Given the size and complexity of our economy and capital markets, this is a logical next step. Now that the SEC has named its chief accountant, it is a good time to start the study, or at least let us know what the next step in the process is going to be.

What do you think will happen next? Do you think ultimately the SEC will move to adopt IFRS?

- Paul Parks | www.IFRS.com