Accounting News

Tuesday, July 17, 2012
SEC Issues Report on IFRS

The Securities and Exchange Commission (SEC) has published their final staff report on the International Financial Reporting Standards (IFRS). The report makes is clear that the SEC has not yet made a decision on adopting IFRS. It examines the pros and the cons of adopting the standard for US capital markets.

The report was ordered by the SEC to help them make a decision. Work was performed under the office of Chief Accountant James Kroeker. Kroeker is leaving the agency later this month. This is yet another person biding their time to avoid making a decision.

Seven themes were throughout the report:

  1. Development of IFRS - There are still concerns about the revenue recognition and lease accounting in the standard.
  2. Interpretive Process - The speed at which changes and updates to the standards needs to be clarified and improved.
  3. National Standard Setters - Since the standard is international it has the complex problem of working with numerous national standard setting bodies. The SEC would like more definition of how the IASB would work the national bodies.
  4. Global Enforcement - The goal of a global standard is the ability for an investor to read any financial report for anyone using the standard and easily understand the approach. Their does seem to be consistency but the SEC wants enforcement to be standard.
  5. Governance - There is a lack of a global mandate for the IFRS Foundation. There may be a time that the SEC needs to protect US capital markets.
  6. Funding for IFRS Foundation - It is a non-profit organization that can not compel funding from any particular source. This may be a problem when only 30 of 100 countries using the standard currently contribute to the foundation.
  7. Investor Understanding - To convert to a new standard will require significant education for US investors. There will also need to be outreach to accountants and accounting firms.

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