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| Waiting
for the IFRS Map NEW YORK -- More than a week after the Securities and Exchange Commission (SEC) announced that it was proposing a "roadmap" on how the Commission may mandate that all American companies file their financial statements in International Financial Reporting Standards (IFRS) by 2016, CPAs are still waiting to see what it says. "The current discussion did not provide a detailed roadmap," said Anthony Chan, vice chair of the NYSSCPA SEC Practice Committee. "I'd like to see a more detailed discussion." The SEC did provide some details of what the proposed roadmap will contain at its Aug. 27 public meeting: that approximately 110 U.S. companies will be able to file their financial statements in IFRS as early as next year (for 2010 filings); that in 2011, the SEC will reconvene to evaluate whether or not the milestones set in the roadmap have been achieved and, if so, will make a decision to adopt the international standard as promulgated by the International Accounting Standards Board (IASB) and make it mandatory; that IFRS will be made mandatory in 2014 for large, accelerated filers (issuers that have a common equity with a value of at least $700 million); that accelerated filers would file in IFRS in 2015; and that 2016 would become the mandatory filing date for everyone else. In his remarks
during the meeting, SEC Chief Accountant Conrad Hewitt said the
Commission "might decide in 2011 to permit early adoption
of IFRS by a larger group than the limited group under the proposal
… but that will be a decision in 2011." "It's hard to give an estimate how long it will be," Heine said. "It's a difficult thing to even estimate. It's a complicated process to get it in the final form" for publication. "Without
a detailed dialogue, it's quite difficult for a registrant to
anticipate what we need to do," Chan said. "People do
not know what the conversation will bring to their bottom line.
If you have a roadmap without a discussion, it's a distress to
the audience."
"The good news is that the SEC, by 2011, is going to reevaluate [the] impact, but 2011 is a little bit far away," he said. "People need to know how imminent this is -- what do I need to do now? People were expecting a little bit more detail when they announced they voted unanimously for this conversion. The SEC has consistently been inconsistent. They should learn from Sarbanes [-Oxley] and provide interpretive guidelines." Interpretive Guidelines Necessary "The SEC has an opportunity to undo some of the sins of Sarbox implementation," Chan said. Without proper guidance, companies might be looking at another "nightmare in implementation," he said. Despite the option for early IFRS adoption, Chan said he thinks most companies will wait a little bit to scrutinize the companies who do adopt early. "They don't want to be saying, 'I adopted incorrectly, now I need to restate,'" he said. The SEC needs to provide examples and timelines for bigger and smaller companies so that they know what they need to do internally and externally to prepare for the transition, he said. A GAAP Contingency Plan? During the SEC's Aug. 27 meeting, Commissioner Elise B. Walter, one of three new SEC commissioners the Senate approved in July -- and one of two Democrats on the five-person commission -- said she supported the IFRS roadmap proposal. "The world should make no mistake," she said, "The SEC is serious about moving to IFRS as the governing accounting standards." But Walter said she strongly believes that "we have to prepare for the alternative, that the Commission will determine not to adopt, or permit the use of, IFRS for U.S. issuers." She said it is critical for early adopters of IFRS to have a "way back" to U.S. GAAP if the SEC decides not to adopt IFRS in 2011. In order to do that, she is supporting one of two proposals the SEC is deliberating for first-time U.S. IFRS filers. The first proposal, "Proposal A," would allow U.S. companies to reconcile their financial statements from U.S. GAAP to IFRS for the first year they file using the international standards. This is the reconciling information required under IFRS as it exists today for the first-time adopter, said John W. White, the SEC's corporate finance director. The second "alternative proposal" is broader, White said, and would require companies to submit -- for three years -- unaudited reconciling information from U.S. GAAP to IFRS in its financial statements. Walter supports the second proposal so that companies will have that way back to U.S. GAAP. "I don't think that's likely," said Edward P. Ichart, chair of the Financial Accounting Standards Committee. "I don't care for that concept." One would have to "read between the lines" to understand what Walter was saying, Ichart said. "If you're saying there's a contingency plan, then to me, it's not as though this is written in stone," he said. Chan acknowledged that November's presidential election could remove the Republican majority at the SEC, possibly putting Walter in a Democratic majority on the Commission, but he said he doesn't think the SEC's IFRS proposal will be taken off the table if a new set of commissioners is appointed, regardless of party affiliation. "I don't think it will be reversed," he said. "It might be slowed down with a new Commission. People might come back and say, how should we do it, what guidelines do we provide and how should we be implementing [them]." Whoever takes over the reins of the SEC, Chan said he hopes the chair embraces the right approach and the right amount of communication in IFRS implementation. "There are a lot of question marks in the minds of people," he said. "We need more guidelines and less skepticism. If we have more structured, objective guidelines, the SEC will have a better-received project than any other project." Colleen Lutolf, Editor, can be reached at clutolf@nysscpa.org. |
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