Rulemaking duties related to federal legislation have prevented the US Securities and Exchange Commission (SEC) from devoting time to deciding on the future of IFRS in the United States, SEC Chief Accountant Paul Beswick said Monday.
“I think from my perspective, everyone in the commission thinks about the decision on IFRS and what the next steps are and thinks it’s very important,” Beswick said during the American Institute of CPAs (AICPA) Conference on Current SEC and PCAOB Developments. “What many people have to realise is, with the passage of Dodd-Frank and the JOBS Act, the commission had a number of issues that were presented that were very complex and taking a lot of time.”
There has been little public discussion of IFRS by the SEC since the SEC staff issued a report in July 2012 that discussed the pros and cons of allowing or requiring US public companies to use IFRS for their financial reporting.
The 127-page report said the standards produced by the International Accounting Standards Board (IASB) were of high quality despite areas that need further development. But it questioned the funding of the IASB and the timeliness of responses to widespread accounting issues by the IFRS Interpretations Committee, and said adoption would be costly for US public companies.
The report did not make a recommendation on whether the SEC should allow or require US companies to use IFRS for their financial reporting. A decision on IFRS now rests in the hands of the SEC commissioners.
“When you think about five commissioners, there’s a certain level of bandwidth they can handle at one time,” Beswick said. “That doesn’t mean we think it’s any less important, and we are in a position where we are continuing to work on the decision, and hopefully we can get to it in the near team.”
IFRS is required for all or most domestic listed companies in 101 of 122 jurisdictions represented in a study whose results were released Monday by the IFRS Foundation, which oversees the IASB.
The study found that:
- Most of the 21 countries that do not require IFRS permit IFRS for at least some listed companies.
- Modifications to IFRS are rare, and often temporary and limited in applicability.
- About 60% of the 101 jurisdictions that require IFRS for listed companies have extended that requirement to unlisted financial institutions and/or large unlisted companies.
The AICPA has been a consistent advocate for one set of high-quality, globally accepted accounting standards. AICPA Chairman Bill Balhoff, in a prepared speech for the conference, encouraged the SEC to make revisiting IFRS a priority. Weather prevented Balhoff from appearing at the conference, and his remarks were read by conference steering committee chairman Jack Day.
“While global adoption of IFRS continues, many countries are waiting to see what happens here,” Balhoff said in his speech. “… We continue to support allowing domestic public companies to voluntarily use IFRS in their SEC filings when it makes sense in their circumstances. Certain issuers based in the US would then have parity with foreign private issuers, and such a programme could serve as a pilot test for further incorporation.”
Beswick did not provide a timeline for the SEC’s further consideration of IFRS.
“I didn’t want people to walk away with the impression that we don’t think it’s important,” Beswick said. “We think it’s very important. But we are dealing with some of the challenges in terms of the commission’s rulemaking agenda.”
—Ken Tysiac (email@example.com) is a CGMA Magazine senior editor.