The first questioner US Securities and Exchange Commission (SEC) Chief Accountant Paul Beswick faced Thursday said the Egyptians built the pyramids more quickly than the SEC has decided on IFRS.
Beswick, speaking at the 12th annual Baruch College financial reporting conference in New York City, did not seem amused.
“I’ll be waiting for your comment letter that details exactly how we should do it,” Beswick said.
A move by the SEC that would require or allow US issuers to use IFRS for their financial reporting continues to look doubtful in the short term.
“The question really is going to be what is that next step, and how big a step are we going to take,” Beswick said. “And that’s something the staff is continuing to study. We’re continuing to do outreach and meeting with preparers and auditors and continuing to explore these issues.”
Beswick said that new SEC Chairman Mary Jo White is working through other priorities such as money market fund reform, cross-border filings and staffing at the SEC. He also said White’s initial efforts should not be taken as a sign of whether IFRS is a priority for the SEC. Beswick said convergence is important, but said financial statement preparers report “change fatigue” in the financial reporting system as they deal with the many fundamental standards changes that the US Financial Accounting Standards Board (FASB) already is issuing.
“To layer on top of that another whole series of changes seems to be somewhat problematic,” Beswick said.
He said he is trying to think about ways that a “softer transition” or a “change over time” can occur. He said convergence of standards is important because business is getting more global. He said more than 450 foreign private issuers in US capital markets file financial reports prepared under IFRS without reconcilliation, so US investors already are examining IFRS-based reports.
No Big Bang
Beswick acknowledged that the idea of gradual change will frustrate preparers because it will mean a period of seemingly perpetual change. He said the international community also may be frustrated, even though jurisdictions such as India and Japan are struggling with the idea of change management and IFRS, just as the SEC is.
Nonetheless, he said, a quick change would present problems.
“There is real risk to the system if we come down with a ‘Big Bang’ approach,” Beswick said. “We hear from the auditors, the preparers and even the investors about some of the challenges they have.”
In the meantime, Beswick said, the remaining convergence projects that FASB is pursuing with the International Accounting Standards Board (IASB) – revenue recognition, leases, financial instruments and insurance – provide continued opportunities for international cooperation with respect to financial reporting standards. He said the SEC is increasing its interaction with regulators across the globe in the name of enforcing consistent application of standards that are converged.
FASB Chairman Leslie Seidman said FASB is creating a transition resource group to guide preparers in implementation of the converged revenue recognition standard, which is scheduled to be released by the end of June. She said FASB members believe the IASB should participate in that resource group, and said it has been suggested that the International Organization of Securities Commissions (IOSCO) also should participate.
Although the “Big Bang” Beswick spoke of with regard to IFRS in the United States doesn’t appear likely in the short term, he said convergence remains important.
“Things are becoming more interconnected,” he said. “The message I would have today is that’s why this matters. People are making investment decisions on IFRS, and I think from my perspective it’s important that we focus on IFRS and try to make it the best-quality product we can, [while] still worrying about the US capital markets.”
—Ken Tysiac (email@example.com) is a CGMA Magazine senior editor.