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

Comments

[dui attorney]

well.. we need new standard to adjust with this situation of economic..

[Aftab]

So I heard, IFRS from 2015 now? Is that right?

[Joe Jefferis]

I've never heard the theory that it was a lack of accounting skill and clarity that caused the financial problems within the failed multinational companies. Interesting thought, so let's explore.

If that is the case, then let's see Sarbanes-Oxley related prosecutions. Sarbanes-Oxley laws and GAAP are pretty cut and dry. Your point supports my theory that multinational companies operate with their own set of laws and refer to it as "company policy". The too big to fail;failed company attorney is the keeper of company policy. We can't get to the attorney because attorney client privilege.

Claiming uncertainty over which methods are preferred requires an assumption that existing US laws and rules aren't applicable to the MNCs.

Rather than enforce the existing rules (GAAP) and laws (Sarbanes-Oxley), the too big to fail;failures push to change accounting rules and enforcement laws to an arena where they can merely argue by analogy (mark to market, everyone is doing it, peer appraisals, monothought, majority rules, mathematics is symantics, it improves life for my constituents) to justify economic value. It is a place with no Court, Laws, or Justice Department.

Based on the comments and my personal experience, I'd say some in the MNC abandoned GAAP in favor of their own IFRS interpretations years ago. When Auditing Standard No5 was released, the MNC that employed me as a Risk and Control Specialist used AS 5 to internally declare Sarbanes-Oxley laws dead.

Too big to fail;failures have been operating outside US law for years. Yes, permitting too big to fail;failures to operate outside the law has damaged the credibility of the United States.

Bring back Glass-Steagull and break up the too big to fail;failures. Transparency and clarity are easier and cover ups more difficult with smaller companies.

[E. Thompson]

I don't think the European FEE is just posturing, and I think we're approaching a critical mass of countries warming to IFRS in the near term. The last few years has seen the erosion of American dominance in economic and political clout. One result is a much more dismissive attitude toward US input into global standards setting.

[Ashok Nayak]

It is a known fact around the world that the US has to take the lead on the IFRS implementation as soon as 2010, at least the MNCs who has to report their financials in the IFRS format, so that other nations to follow.

The recent past debacles in Citi, Morgan, Lehman, AIG etc were due to lack of control, transparency and clarity on usage of accounting methods and practices. Once it is standardize across the accountantss job would be fairly easier and can be free from ambiguity and better control can be adhered to, consistently.

[Joe Jefferis]

It was a mistake to allow mark to market in 2006. It was permitted as a transitional step toward appeasing the International community and putting us on a path to adopting IFRS. We now see the economic devastation that mark to maket brought about in just two years. Quickly the monothought deciders of economic value began to inflate oil's price with a speculative bubble.

The more oil you bought the greater economic value you appeared to possess. It was rooted in the principle that there is no alternative to oil for energy.

Then came the inevitable period between July 2008 and September 2008. The oil bubble popped.

Does anyone believe mark to market will not create another non economic value bubble?

Who was Stanley Meyer?

[Bill Schneider]

The SEC is a political body and therefore pragmatic. It is clear no one will adopt IFRS until there is a defniitive decision from the SEC - no more "let's wait until 2011" and then we'll decide. I suspect they will lay out a time line for adoption that will be close to their original (2014 - 2016 depending on company size), but they won't wait until 2011 to decide to go forward. They will make it a "certainty" with the final rulemaking in early 2010.

[Joe Jefferis]

The SEC will likely support the too big to fail;failures and globalist corporations who need less rules based accounting and more principles based accounting to perfect their control over the world's financial markets. The SEC has shown itself as an expensive public relations firm with its "settlement deal" assisting Bank of America with its cover up.

Decisions of economic value added will become political and the wealth will be spread around based on non-value added activities like bribes, ponzi schemes, collusion, corruption, votes, and some of the same old shenanigans. With IFRS there will be no disputing with the sovereign deciders of economic value. The United States will not have veto power. Economic value will blur into social value and standing among the elite deciders of economic value.

1+3=5 if enough deciders of international economic value join together in monothought. Mark to market breeds good buyers, but fails to require profitable selling activities.

It is a bleak outlook. US GAAP is and has been America's calculated measuring rule to ensure economic prosperity. Debits must equal credits and balance sheets must balance. Rule breakers must be punished.

It is clear the global accounting firms and some IT companies stand to reap huge profits if a quick change is implemented.

Please read the Overview of Islamic Finance Occasional Paper No. 4 from August 2006 to get an unbias US Department of Treasury Office of International Affairs perspective.

Are we now ready to turn over our financial sovereignty?

Diversity in opinion and method is our strength, not our defect.

[E. Thompson]

It sounds as if the tenor is down to, "Get on the bus or get left in the dust" as far as Europe is concerned. I expect the SEC will split the differnce between the instant capitulation Europe is looking for and the 10-15 year time frame mentioned by Herz.