On December 5, the chief accountant of the Securities and Exchange Commission, James L. Kroeker, stated in a speech before the National Conference of the American Institute of Certified Public Accountants (AICPA) that the SEC’s staff will need “a few additional months” to prepare a final report concerning a possible incorporation of International Financial Reporting Standards (IFRS) for U.S. issuers. Kroeker noted that he was encouraged about the potential prospects of IFRS incorporation in the United States, and stated that creating a strong and lasting framework was more important than a rapid timeframe for adoption and implementation.
On February 24, 2010, the SEC issued a statement that it believed that a single set of high-quality globally accepted accounting standards would benefit U.S. investors. In this statement, the SEC encouraged the convergence of U.S. Generally Accepted Accounting Principles (U.S. GAAP) and IFRS in order to narrow the differences between the two sets of standards. The SEC also directed its staff to execute a “work plan” to aid the SEC in its evaluation of the impact that the use of IFRS by U.S. companies would have on the U.S. securities market and to position the SEC to make a determination in 2011 regarding incorporating IFRS into the financial reporting system for U.S. issuers.
However, as Kroeker noted in his speech, the Financial Accounting Standards Board and the International Accounting Standards Board have revised their original goal of eliminating major differences between IFRS and U.S. GAAP by mid-2011. These boards have now agreed that a number of projects designed to eliminate such differences would be delayed to allow for a sharper focus on a smaller number of key projects related to revenue recognition, leasing and financial instruments.
Kroger mentioned in his speech that he believed that the SEC’s final framework should:
- Demonstrate a high level of support for U.S. commitment to continued development and use of global consistent high quality accounting standards;
- Provide both in fact and in substantive operation clear U.S. authority over standards applicable in the U.S. capital markets;
- Provide for and facilitate a strong U.S. voice in the process of establishing global accounting standards;
- Be responsive to the economic and other impacts of change;
- Consider whether to retain U.S. GAAP as the basis for U.S. financial reporting, thereby mitigating the costs and complexity of introducing a new set of standards under regulatory regimes, contractual documents, and U.S. laws under which compliance with U.S. GAAP is often specifically contemplated.
Click here for the full text of Kroeker’s remarks, which were made at the 2011 AICPA National Conference on Current SEC and PCAOB Developments. Click here for the SEC release from February 24, 2010 titled “Commission Statement in Support of Convergence and Global Accounting Standards.”