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IFRS: Americans play hard to get

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6th Aug 2012
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The drive for global accounting rules is threatening to stall after the US Securities and Exchange Commission (SEC) continued to drag its feet about saying when or if US public companies should switch to international accounting standards.

The US markets regulator published a non-committal report in July that gave no clue as to when an already-delayed decision on possible IFRS incorporation would be taken.

The International Accounting Standards Board (IASB), which has been working with its counterpart, the US Financial Accounting Standards Board, to narrow differences between IFRS and US GAAP, expressed annoyance at the SEC’s dithering.

Michel Prada, chairman of the trustees who oversee the IASB said: “While recognising the right of the SEC to determine the method and timing for incorporation of IFRSs in the United States, we regret that the staff report is not accompanied by a recommended action plan for the SEC. Given the achievements of the convergence programme inspired by repeated calls of the G20 for global accounting standards, a clear action plan would be welcome.”

For the “benefit of both US and international stakeholders”, the IASB trustees look forward to the SEC “resolving the continued uncertainty regarding the US’s commitment to global accounting standards,” Prada said.

The main findings in the SEC’s 127-page report include:

  • The level of preparedness for IFRS varies widely within the US. Some companies’ employees are already familiar with IFRS and would require little help to be fully prepared for a transition. But other companies have little or no knowledge of IFRS requirements or developments and are only focused on US GAAP.
  • Concerns about the workload involved in making the transition to IFRS: For example, a “big bang” approach, coupled with a short transition period, could “impose a significant burden on human capital if there is too little time to develop expertise internally and if many companies are competing for the same pool of qualified external candidates”, the SEC staffers wrote
  • Smaller and mid-size public accounting firms have not developed the extensive IFRS infrastructure of the largest public accounting firms. Smaller firms generally lack IFRS guidance capabilities and many have no plans to develop or acquire such guidance until the Commission makes a decision regarding any incorporation of IFRS into the US financial reporting system.
  • Investors said that a transition period would be necessary before large-scale adoption of IFRS takes place to enable analysts to adjust their models. This transition could last as little as a few quarters to several years.

IFRS sceptics

Investors have generally supported the idea of a single set of high-quality international standards, but the SEC report says their worries include the lack of investor participation on the IASB and IFRS Foundation, and the potential for political interference in standard setting.

Former IASB chairman Sir David Tweedie, now president of ICAS, told AccountingWEB in May that the SEC’s continuing ambivalence is holding up the whole project.

“Japan is waiting to see what the US does. China too - the project has got to keep going and the Americans hold the key,” said Sir David.

If after all these years of paying lip service to the idea of converging global accounting standards, “there will be a feeling that they’ve been having us on” if they don’t commit to it, he added.

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By Roland195
06th Aug 2012 12:56

Are we surprised?

When you think of all the other things that we have tried to teach America and failed - English, Football, Beer etc, are we surprised that they want to go their on way with accounting too?

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By ThornyIssues
06th Aug 2012 13:11

They have too much ....

they want to be able to hide .... obviously. 

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By Trevor Scott
08th Aug 2012 11:26

Given that the SEC

failed, miserably, to regulate numerous corporations involved in serious fraud (Enron etc; which was picked up years before by average CPA's but ignored by the SEC etc) and its existence has been in doubt for years.....just what is the point in expecting it to now suddenly become well managed and tackle this issue.

 

In respect of changing standards. And any reasonable accountant can quickly move over to any new reasonable standards as they're unlikely to ever be revolutionary.

 

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