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IASB, FASB Chairs Address Possible IFRS Option in U.S.

According to a report by Steve Burkholder in today’s BNA Daily Report for Executives, the respective Chairmen of the International Accounting Standards Board and the Financial Accounting Standards Board discussed at a conference yesterday the potential pros and cons of what would happen if - as posited by IASB Chairman Hans Hoogervorst - the U.S. Securities and Exchange Commission were to potentially permit the optional use of International Financial Reporting Standards – vs. potentially requiring the use of IFRS - by U.S. issuers.
 
(Note: requiring the use of IFRS in the U.S., aka the “incorporation of IFRS into U.S. GAAP,” remains the preference of the IASB, but a second fallback choice, to show some movement toward ‘adoption’ of IFRS – besides the completion of the current convergence program, would be to allow an “IFRS option” in the U.S.)
 
Hoogervorst made the suggestion, noted Burkholder, at the 18th Annual New York Society of Securities Analysts’ International Financial Reporting Conference, (this year, presented by IAS Seminars.) Burkholder added that FASB Chairman Leslie Seidman observed that a two-GAAP system in the U.S. could become ‘unmanageable.’ Additionally, Burkholder noted that former SEC Chief Accountant Jim Kroeker had raised concerns about offering an IFRS ‘option’ to U.S. filers. (See also our blog post from November, 2011: SEC’s Kroeker Questions IFRS ‘Option’ as an Option)
 
Separately, as previously reported in this blog on Dec. 12, 2012, the Institute of Chartered Accountants of England and Wales (ICAEW) released a report on The Future of IFRS, authored by Dr. Nigel Sleigh-Johnson, recognizing IFRS as The Global Accounting Standard,” and while encouraging countries to fully adopt IFRS, encouraging those who cannot or will not require adoption, to at least permit an option for adoption.
 
The SEC had previously indicated that following completion of its staff’s ‘IFRS Roadmap, ’ the Commission would be in a position to reach a decision on whether or not to require, or permit, the use of IFRS by U.S. issuers for purposes of their SEC filings.
 
However, the decision was slowed for many reasons, and indeed the slowing of the decision, although derided by some, was applauded by many others, since it is a very complex decision, involving more than just accounting issues -and even  “just accounting issues” could be viewed by some as an understatement in itself. Other issues involve all kinds of regulatory reporting, income tax reporting, and matters such as compliance with lending covenants based on GAAP reporting, LIFO/FIFO issues, sovereignty issues raised in connection with Congress’ oversight of the SEC and the SEC’s oversight in turn of FASB, and more.
 
 
BNA’s Burkholder notes in his articlethat SEC Senior Associate Chief Accountant Jenifer Minke-Girard also spoke at the conference. Observed Burkholder:
 
Minke-Girard noted that some members of the SEC have supported some form of an IFRS-reporting option—perhaps for certain companies, or types of companies, ‘‘while everyone else stays on U.S. GAAP.’’ However, she continued, ‘‘I think we just haven’t had consensus on that view.’
 
This blog has noted the nuances between the use of seemingly interchangeable terminology numerous times, such as:
-       Single set, global set of accounting standards, vs. 
-       Common set of accounting standards
 
However, the terms above do not necessarily mean the same things to different people, and indeed can be a world apart.
 
For example, even the fact that “over 100 countries are on a single set of standards – that set of standards being IFRS” is questioned by some, in that some of those countries have adopted their own national brand of IFRS, with their own national flavor or exceptions, thus reducing the original goal of comparability across all filers, regardless of nation, filing in IFRS. And, given the state of the remaining major convergence projects, and some projects not the convergence docket, it is possible that if the U.S. were to incorporate IFRS with a FASB endorsement approach, retaining the existing major differences between U.S. GAAP and IFRS, some would argue as to what extent we actually adopted IFRS vs. an IFRS-lite (or more likely, IFRS-plus) as our own homegrown flavor of IFRS.
 
See, for example, our Nov. 15, 2011 post on the FAF Response to SEC’s Condorsement Proposal, and the evolution in views evident from comparison vis-a-vis our June 28, 2009 post.
 
I highly recommend reading Burkholder’s Jan. 10, 2013 BNA article, IASB Chief Advocates Optional IFRS Use In United States; FASB Chairman Sees Pitfalls, in its entirety, (see link further below) and am pleased to report that FEI received permission from BNA to link to the article in its entirety. Thank you Steve, and BNA!
 
Reproduced with permission from Daily Report
for Executives, 08 DER G-6 (Jan. 11, 2013).
Copyright 2013 by The Bureau of National Affairs,
Inc. (800-372-1033) < http://www.bna.com  >
 
 
Read the article here: IASB Chief Advocates Optional IFRS Use in United States; FASB Chairman Sees Pitfalls, by Steve Burkholder, BNA Daily Report for Executives, Jan. 11, 2013.
Posted: 1/11/2013 10:48:59 PM by Edith Orenstein | with 1 comments
Filed under: IAS Seminars,IFRS optional,optional IFRS,Hoogervorst,IASB,ICAEW,IFRS,Minke-Girard,NYSSA,SEC,Seidman,Sleigh-Johnson,FASB


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Comments
Anonymous
Steve Burkholder is an excellent reporter on the accounting issues, and gets right to the point of the issues. Hoogervorst continuously appears to act on emotion rather than logic. Here are four examples from the article:
1. Option to adopt -- “would represent a welcome, visible commitment to IFRS.” The US is not ready to commit, so why would we accept the option? Isn’t it logical to make the commitment and THEN decide about implementation, rather than vice-versa?
2. Required adoption for some multinationals -- “He added that there is inconsistency in financial reporting in the United States today, as foreign private issuers listing on U.S. stock exchanges have been able to file using IFRS without reconciliation to U.S.” And, this would be a “way for the United States to show that you have made a commitment to IFRS.” See 1 above. (Additionally, this is a very shaky basis for suggesting the US adopt, as some would say IFRS should never have been allowed for those companies, and a reversal of that would be more appropriate than US companies' ditching US GAAP.)
3. Single set of global accounting standards -- Re the Group of 20 nations’ suggesting that we need to move to a single set of global accounting standards. How can anyone disagree with the goal of a single set? They have not said it must be IFRS.
4. The lack of decision from SEC about IFRS -- ‘‘…nothing is happening,’’ said Hoogervorst, who described ‘‘a bit of a credibility issue.’’ I couldn’t agree more, but Hoogervorst doesn’t seem to understand it’s a credibility issue for the IASB, not the SEC. The US has a credible set of accounting standards, and, clearly, the problem is that the IASB and IFRS don’t yet have the credibility necessary for dumping our standards and starting over.

Let’s see if we can continue to get our standards closer together. If not, let’s all move on.
1/14/2013 2:33:32 PM

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Edith Orenstein