SEC Reaffirms Commitment To Single Set of Standards, And To Reaching Decision In 2011, Contingent On Convergence, Workplan
Feb. 24, 2010
At an open commission meeting earlier today, the U.S. Securities and Exchange Commission unanimously voted to issue a statement:
1. Reaffirming its support for a single, globally accepted [set of] standards;
2. Describing issues that need to be analyzed, falling under six categories in an SEC “Workplan;” and
3. Describing events that need to occur between now and 2011, including completion of consideration of the issues in the SEC’s Workplan and completion of the convergence projects on the FASB-IASB MOU.
SEC Chairman Mary L. Schapiro said, though “we do not have all the information” to make the decision on whether to move to IFRS, “we remain on a steady path to make the decision in 2011.” She added: “Assuming completion of the[IASB-FASB] convergence project and [the SEC staff’s] workplan, the commission will then be in a position to determine” if IFRS should be incorporated in the U.S. “Until that time,” said Schapiro,”we will expect staff to provide periodic, written reports to the commission.”
SEC Chief Accountant Jim Kroeker added:
We anticipate [that with] completion of the workplan and the IASB-FASB convergence projects, the commission will be in a position in 2011 to determine whether and how to incorporate IFRS into the U.S. financial reporting system.” He added that commenters on the SEC’s proposed IFRS roadmap indicated that, “issuers would need approximately 4-5 years” to transition to IFRS. Kroeker said: “The statement notes, if it is determined in 2011 to incorporate IFRS [into the U.S. financial reporting system], the transition for U.S. issuers would be approximately 2015 or 2016.”
** UPDATE: According to the SEC's press release issued this afternoon: "[I]f the Commission determines in 2011 to incorporate IFRS into the U.S. financial reporting system, the first time that U.S. companies would report under such a system would be no earlier than 2015. The Work Plan would further evaluate this timeline."
The six categories to be studied by SEC staff under the “workplan,” as detailed by SEC staff member Nili Shah, include:
1. Whether there has been sufficient development of IFRS for the U.S. system, including comprehensiveness, enforceability of IFRS, auditability and IASB’s efforts to improve IFRS;
2. Independence of standard setting , including IASB governance, funding;
3. Investor understanding and education re: IFRS; current familiarity; actions needed to facilitate further understanding, should the commission decide to incorporate IFRS into the U.S. financial reporting model;
4. Examination of U.S. regulatory evnvironment that would be affected by a change in financial reporting standards;
5. Impact on issuers – large and small – specifically to assess the scope and timing for issuers to make necessary changes to systems, controls and procedures, consider effects of incorporating IFRS on issuers’ ability to comply with corporate governance requirements, litigation contingencies; and
6. Human capital – strength and ability of individuals and approaches and time frame
** UPDATE: More formally, the six categories - labeled A-F in the SEC's Work Plan - are outlined as follows on pages 14-21 of the Commission Statement:
A. Sufficient Development and Application of IFRS for the U.S. Domestic Reporting System
2. Auditability and Enforceability
3. Consistent and High Quality Application
B. The Independence of Standard Setting for the Benefit of Investors
C. Investor Understanding and Education Regarding IFRS
D. Examination of the U.S. Regulatory Environment that Would Be Affected by a Change in Accounting Standards
E. The Impact on Issuers, Both Large and Small, Including Changes to Accounting Systems, Changes to Contractual Arrangements, Corporate Governance Considerations, and Litigation Contingencies
F. Human Capital Readiness
In executing the Work Plan, SEC staff will conduct its own research as well as conduct outreach with others, including issuers, auditors, investors, academics and others, and will also consider academic research.
Role of the Financial Accounting Standards Board
In response to a question from Chairman Schapiro on the role of FASB if the SEC were to incorporate IFRS in the U.S., Chief Accountant Jim Kroeker said:
“The statement itself makes clear the FASB will not only have an extremely important role during the MOU period – the period they are working with the IASB to draw closer the set of standards with U.S. GAAP, but makes clear the commission views the FASB would have an ongoing and substantive role, even in a post [IFRS] incorporation world.”
LINKS TO PRESS RELEASE, COMMISSIONER AND STAFF STATEMENTS
The information above is based on listening to the webcast of the SEC open commission meeting. We have updated this summary to include links to the SEC press release and commissioner, staff statements posted so far.
SEC Press Release: SEC Approves Statement On Global Accounting Standards
Commission Statement in Support of Convergence and Global Accounting Standards
Opening remarks of:
Chairman Mary L. Schapiro
Commissioner Luis A. Aguilar
Commissioner Troy A. Paredes
Commissioner Kathleen L. Casey
Prepared Feb. 24, 2010 by Edith Orenstein, director of Accounting Policy Analysis and Communications, Financial Executives International. This summary does not represent FEI opinion unless specifically noted above.