The SEC Delays its Decision on IFRS

The SEC may delay its decision on IFRS for several months according to Jim Kroeker, the SEC’s Chief Accountant. At a recent AICPA Conference Kroeker remarked that the SEC staff would need “a few additional months” to complete the final report on the IFRS Work Plan for U.S. markets. The SEC had previously stated that the goal was to make a decision on IFRS adoption in 2011. In his statement, Kroeker said, “Given the number of things on our agenda, I cannot give you a precise schedule. I can tell you that we will do so carefully and thoughtfully, being guided by an ideal that produces the maximum benefit for the investing public and the capital markets.”

There are enormous pressures on both sides of the U.S. IFRS decision. Pushing for adoption are the G20 group of nations, the IASB and a significant number of U.S. stakeholders including large multinational companies (who are already dealing with IFRS in many jurisdictions), Big 4 public accounting firms, and those seeking to be competitive in global capital markets. Others want to stay with U.S. GAAP. This group includes smaller companies, companies with U.S. operations only, and financial statement preparers who are already dealing with other significant changes.

Moving Toward IFRS

The SEC has been studying the implications of a move to IFRS for some time. In December 2007 the SEC removed the requirement for Foreign Private Issuers to reconcile to U.S. GAAP. The result is that a large number of Foreign Private Issuers are now filing Forms 20-F and 40-F in IFRS. The decision to eliminate the requirement to reconcile IFRS to U.S. GAAP is what caused many market participants to ask: “If IFRS is good enough for Foreign Private Issuers, why isn’t IFRS good enough for U.S. companies”?

In November 2008 the SEC issued a Roadmap for the possibility of using IFRS for other types of SEC filings as well. The Roadmap to IFRS was conditioned upon a study of the implications of IFRS adoption and its impact on investors and other market participants. A decision about IFRS would then be considered, but only after seven milestones had been addressed. It was the Roadmap to IFRS that set 2011 as the year for the SEC to decide the fate of IFRS.

In February 2010, based on comments from constituents on what the SEC should take into account in its evaluation of IFRS, the SEC issued a statement in support of convergence of global accounting standards. In its statement the SEC outlined the factors it considered to be of particular importance as it continued to evaluate IFRS, and presented a comprehensive work plan that laid out what had to be done to support an IFRS decision.

The Condorsement Approach

In May 2011, the SEC’s Office of the Chief Accountant issued a paper in which it described one possible IFRS adoption approach it dubbed “Condorsement”. The Condorsement idea resulted from combining the most common IFRS adoption approaches used in other jurisdictions, namely Convergence and Endorsement. These two approaches emerged as the most common among jurisdictions that have adopted IFRS. These common choices for adopting IFRS consist of:

• Convergence – Under this approach jurisdictions do not directly adopt IFRS as their accounting standards. Rather, they maintain local standards while making efforts to converge such standards with IFRS.
• Endorsement – Under this approach jurisdictions directly incorporate individual IFRS into their local standards based primarily on (1) stated criteria designed to protect investors and other stakeholders, or (2) modifications or additions to individual IFRS to comply with local regulations or to address the perceived need for country-specific or industry-specific guidance.

Although the SEC has not yet made a decision regarding whether and, if so, the manner in which IFRS adoption should be accomplished, the Office of the Chief Accountant said that in addition to the Condorsement approach, it is also considering several other approaches including full adoption of IFRS on a specified date, full adoption over a staged transition period, and an option allowing U.S. issuers to apply IFRS.

Generally, the Condorsement approach would retain the FASB as the U.S. standard setter, retain the SEC’s oversight role over the FASB, and incorporate IFRS into U.S. GAAP over a defined period of time (say five to seven years), with the ultimate goal being that a U.S. issuer compliant with U.S. GAAP would also be able to assert that it is in compliance with IFRS. Condorsement would not dilute the SEC’s role in setting accounting standards or establishing rules for public companies.

In a Condorsement based adoption approach, existing convergence projects would be stratified and addressed by category as follows:

• Category 1 projects would be those U.S. GAAP and IFRS convergence projects scheduled for completion;
• Category 2 projects wild include those that the IASB has included on its current agenda for IFRS; and
• Category 3 projects would include those standards that are not on the IASB’s agenda for future standard setting.

Category 1 projects would be incorporated into U.S. GAAP and IFRS thereby practically eliminating the major differences. The U.S. GAAP related to Category 2 projects would remain in effect until a new IFRS standard was issued on that topic. The new IFRS standard would then be considered for inclusion in U.S. GAAP and would become the basis for determining if U.S. GAAP on that topic should be retained, the newly issued IFRS should be adopted, or if other action should be taken with respect to that standard. Following the development of an IFRS transition plan, Category 3 projects would be addressed in a manner similar to Category 2 projects with the idea being to allow prospective adoption of Category 3 projects whenever possible.

In November 2011 the SEC released two reports on IFRS adoption. The first report compares U.S. GAAP and IFRS and a second report that analyzes IFRS in practice.

More Time Needed to Complete IFRS Work Plan

In his December 5 speech announcing the delay in releasing the Commission’s final report on the IFRS Work Plan for U.S. markets, Kroeker emphasized the importance of taking this opportunity to establish a “strong and lasting” framework for IFRS incorporation into U.S. GAAP. Kroeker believes the framework should:

• “Demonstrate a high level of support for U.S. commitment to continued development and use of global consistent high quality accounting standards;
• Provide both in fact and in substantive operation clear U.S. authority over standards applicable in the U.S. capital markets;
• Provide for and facilitate a strong U.S. voice in the process of establishing global accounting standards;
• Be responsive to the economic and other impacts of change;
• Consider whether to retain “U.S. GAAP” as the basis for U.S. financial reporting, thereby mitigating the costs and complexity of introducing a new set of standards under regulatory regimes, contractual documents, and U.S. laws under which compliance with U.S. GAAP is often specifically contemplated.”

The State of Convergence

On a related note, both FASB chairman Leslie Seidman and IASB chairman Hans Hoogervorst said in recent speeches that as the current U.S. GAAP and IFRS convergence projects wind down, the Memorandum of Understanding (“MoU”) approach to converging U.S. GAAP and IFRS is not a the best way to resolve differences. As efforts to converge differences between U.S. GAAP and IFRS are made, differences between the two standards continue to persist. Both emphasized that a new, more workable approach to bringing the two standards together is needed.

At the recent AICPA National Conference on Current SEC and PCAOB Developments Seidman said that the FASB would like to finish its convergence work on remaining priority projects like revenue recognition, leasing, financial instruments and insurance. She said “However, we do not believe indefinite convergence is a viable option, politically or practically. As any observer can see, this process is challenging technically and administratively.” Hoogervorst echoed her comments at the same conference when he said “Our convergence history with FASB has been extremely useful in getting us to a point where IFRS and U.S. GAAP are much improved and closer together. So, it’s tempting to just maintain the status quo. But for the long-term, the status quo is an unstable way of decision making that inevitably leads to diverged solutions or sub-optimal outcomes.”

A Path Forward

It seems clear now that a path toward a single high quality global accounting standard is emerging. It appears that convergence may be nearing an end and endorsement may begin to play a more important role in global standard setting. The details may not yet be finalized, but U.S. companies are already being impacted by global accounting standards. As converged standards begin to be implemented, companies need to take a broad view of their approach to implementing and following new accounting standards. A formal strategy for dealing with global standards should be developed that addresses:

• Leadership and communication of the global standard adoption process;
• Considers what peer companies are doing;
• Addresses accounting processes to identify any gaps in information gathering that may need resolution;
• Prepares for changes in technology that may be required; and
• Develops worker’s skills for addressing changing accounting standards.

Since new standards are likely to be much more principles based, a management decision support framework should also be developed to formalize how accounting decisions will be made. An SEC decision on IFRS appears to be around the corner. why not begin to develop a readiness framework for adopting global accounting standards by becoming a champion for preparedness in your organization?

The IFRS Foundation Publishes an Interim 2011 IFRS Taxonomy

On August 22 the IFRS Foundation published an interim release of the 2011 IFRS Taxonomy to address Presentation of Items of Other Comprehensive Income (IAS 1 amendments) and Employee Benefits (IAS 19).

The 2011 IFRS Taxonomy is based on IFRS as issued at January 1, 2011. The interim release of the IFRS Taxonomy contains additional taxonomy concepts that reflect new IFRS standards and improvements to existing IFRS standards published by the IASB. The interim taxonomy release gives companies the opportunity to report XBRL financial concepts using the latest IFRS standards without creating custom taxonomy elements.

The interim release of the 2011 IFRS Taxonomy follows the taxonomy architecture in The IFRS Taxonomy 2011 Guide and The Global Filing Manual.

Which is Better – Principles or Rules?

When it comes to accounting standards, there is debate about whether principles or rules are better. Some argue that the rules based US GAAP approach is better while others argue that the principles based IFRS is better. But which approach, principles or rules, do you think is best?

While US GAAP is often considered rules based, it is better to think about individual standards within US GAAP as being more or less rules-based. There are advantages and disadvantages to a rules based approach. Advantages include clarity in application, reduction of risk (but only when the applicable rule is followed), and comparability for companies in the same industry for the same rule. Disadvantages include a regimented approach where a transaction must be accounted for in accordance with the rule even if the applied accounting is misleading, non-comparability between different industries when the transactions are similar, and increased risk when the applicable rule is not followed (its hard to defend a position when the rule is broken).

Similarly, IFRS is often thought of as principles based, but is better considered more or less principles based. Clearly defined principles provide many advantages as a basis of accounting, including allowing preparers the ability to consider the best way to account for and report a transaction, increased comparability among companies with similar transactions no matter the industry and the ability to defend positions based on the principles followed. Disadvantages include an increased ability to manipulate transactional accounting, increased variations in accounting approaches for similar transactions, and fewer bright lines to consider in determining how to account for a transaction.

In today’s global marketplace IFRS has a distinct advantage over US GAAP. The fact is that IFRS is either permitted or required in over 120 jurisdictions while US GAAP is required in one. The SEC will decide later this year when, whether and how IFRS should be adopted in the United States. If IFRS is permitted or required in the United States, companies will need to develop a judgment framework that documents how accounting decisions will be made in a principles based accounting environment. Because there could be variations in accounting by different companies for similar transactions, companies should disclose the basis for the accounting followed as well as the factors considered and reasons for accounting decisions made.

If you could choose to follow accounting standards that are principles based or rules based, which would you choose?

Lack of IFRS Taxonomy…an IFRS Adoption Hinderence?

The SEC’s Roadmap to IFRS adoption consisted of milestones that if met could pave the way to IFRS adoption. One of the Milestones, facilitating the use of interactive data (XBRL) for IFRS, is a current topic in 2011 since all filers, including certain foreign private issuers using IFRS, need to begin filing in the XBRL format. If US filers could adopt IFRS, they would need to be able to file XBRL exhibits to their IFRS SEC filings. That cannot be done until an IFRS Taxonomy is approved by the SEC.

Effective with periods ending after June 15, 2011, Foreign Private Issuers using IFRS as issued by the IASB are being required by the SEC to file their annual reports on forms 20-F or 40-F with an XBRL exhibit. In the first year, detail tagging of the front facing financial statements and block tagging of footnotes would be need to be completed. In the second year in addition to detail tagging of the front facing financial statements, the footnotes would be detail tagged at four different levels as outlined below.

• Level 1 – Each complete footnote tagged as a single block of text.
• Level 2 – Each significant accounting policy within the significant accounting policies footnote tagged as a single block of text.
• Level 3 – Each table within each footnote tagged as a separate block of text.
• Level 4 – Within each footnote, each amount (i.e. monetary value, percentage, and number) is required to be separately tagged. Narrative disclosures are not required.

One big open item on the 2011 XBRL agenda is the IFRS Taxonomy. Yes, the SEC’s XBRL rule requires certain foreign private issuers to file the XBRL exhibit to their SEC filings beginning with periods ended after June 15, 2011. But to do so, these filers would be required to use a taxonomy that is approved by the SEC (approved taxonomies are listed on the SEC’s website). The problem is that there is not an approved IFRS taxonomy listed on the SEC’s website.

Without an approved IFRS Taxonomy, foreign private issuers will not be able to prepare XBRL financial statements and the ability of US companies to move to IFRS would be hindered. Fortunately, there is a 2011 IFRS taxonomy that has been exposed for comment until March 18, 2011. Hopefully the SEC will consider approving the new 2011 IFRS Taxonomy or will issue additional guidance clarifying expectations for foreign private issuers. To encourage US adoption of IFRS it is essential the the IASB develop a robust IFRS Taxonomy that can meet the demands of the advanced reporting requirements US companies.

Is the IFRS Taxonomy robust enough for US use and what’s next for XBRL and IFRS? We will have to wait until the SEC clarifies its intentions later this year.

Choose adoption not condorsement!

There have been a few articles and blog posts favoring a blend of IFRS convergence and endorsement (dubbed “condorsement” by some). Is this really a good idea? We started down the road to IFRS in order to achieve a “high quality global accounting standard”. Would ‘condorsement” lead the largest capital market in the world to a high quality global accounting standard?

One of the criticisms of IFRS acceptance around the world has been the emergence of national IFRS “flavors”. A condorsement approach would undoubtedly lead to a US flavored accounting standard. The resulting somewhat similar global accounting standard would never allow multinational companies to achieve the economies of scale that could be achieved by with a truly global accounting standard. Similarly, simplifying comparisons of global investment options would be hindered. If we are serious about improving global financial reporting transparency then we should adopt a high quality global accounting standard.

In addition to achieving high quality and global acceptance our further goal is to improve financial reporting transparency. The best way to obtain transparency in financial reporting is through a principles based approach. US GAAP is primarily rules based. Pursuant to US GAAP, different industries report similar transactions differently because of the rules they must follow. Under a principles based approach, financial reporting professionals determine the best representation of a transaction based on well established principles. Some say we can’t adopt a principles based approach because we live in a litigious society. I say people who follow rules have no defense when they inadvertently break that rule, but people who follow principles can easily defend themselves based on the principles followed.

Like it or not, IFRS is the de facto (i) principles based (ii) globally accepted and (iii) high quality accounting standard. Over 100 countries have adopted IFRS. Nine of the ten largest capital markets have adopted IFRS. Want to guess which country is the IFRS adoption hold out? As for the countries that have adopted national flavors of IFRS, how can we expect them to move to full IFRS adoption if we don’t do adopt IFRS as issued by the IASB?

Choose adoption not condorsement!

IASC Seeks XBRL Participants

The International Accounting Standards Committee Foundation (IASCF) through its standard-setting body, the International Accounting Standards Board (IASB), is seeking FPI participants for a pilot XBRL program. The IASCF sees itself as the independent, private and not-for-profit body responsible for developing a single set of high quality global financial reporting standards for use throughout the world. XBRL Pilot participants are being sought because the SEC’s rule on XBRL requires that Foreign Private Issuers (FPI’s) begin filing an XBRL formatted exhibit to form 20F for financial periods ending after June 15, 2011.

On 17 December 2008, the SEC published rules that require all FPIs to submit their financial reportsin Interactive Data format, SEC speak for XBRL. According to the rule, FPIs “using IFRS as issued by the IASB will be required to tag their financial information using the most recent list of tags for international financial reporting, as released by the IASCF and specified in the EDGAR Filer Manual”.

FPIs, which will be mandated to file with XBRL in IFRS from 15 June 2011, are invited to participate in a pilot initiative being coordinated by the IASC Foundation. The pilot will focus on FPI use of the 2010 IFRS Taxonomy to tag SEC filings in XBRL.

The purpose of the pilot is for FPIs to produce real XBRL filings that include block-tagged notes. The pilot is intended to test the validity of the IFRS Taxonomy to “determine and demonstrate that the IFRS Taxonomy is practical for filers and for users of filed XBRL content”. FPIs from all industries are welcome to participate.

The pilot initiative will start when the final IFRS 2010 Taxonomy is released (about the end of April 2010). Companies interested in joining this initiative are invited to express their interest by writing to Olivier Servais, Director of XBRL Activities

• Mail: IASC Foundation: 30 Cannon Street, London EC4M 6XH
• Email: oservais@ia sb.org

The IASCF will accept applications until 15 May 2010.

For more information on XBRL see http://xbrl.org/; http://xbrl.us/Pages/default.aspx and http://xbrlusa.wordpress.com/

US GAAP & IFRS Convergence Progress Report Issued

The Financial Accounting Standards Board (FASB) and the International Accounting Standards Board (IASB) published an accounting standard convergence progress report on April 14 2010. The report summarizes the two boards work to improve and achieve convergence of US GAAP and IFRS. In November 2009 the two boards demonstrated their shared commitment to convergence by establishing a comprehensive work plan to complete their joint projects by a June 2011 target. The 2011 target is significant because it corresponds with the year in which the SEC is expected to make a date certain decision about IFRS conversion.

To accomplish their objective of substantially converging US GAAP and IFRS by 2011, the boards have accelerated and intensified their efforts. Instead of meeting every four months, they have agreed to meet every month. In addition, they have expressed their willingness to schedule special meetings to address key convergence issues.

In addition to the stepped up convergence efforts, the boards are developing extensive outreach programs to involve a broad group of convergence stakeholders in standard setting due-process. Their outreach will include educational sessions on their websites and in Oceania, North America and Europe. They have already scheduled session in Tokyo, and Norwalk Connecticut.

As of 31 March 2010, the FASB and IASB had achieved substantially all of the milestone targets they set for the first quarter of 2010. The progress made by the boards is explained more fully in their report.

• For five of the major Memorandum of Understanding projects they are on track to publish, by mid-2010, exposure drafts that would improve and achieve substantial convergence of US GAAP and IFRS in those areas.
• On two major projects, financial instruments and insurance contracts, the boards have reached different conclusions on some important technical issues. Addressing convergence differences in those areas could affect the convergence timetables described in their report.
• The boards also agreed in late March to explore an alternative approach to lessor accounting. That decision could also affect convergence timetables

The boards have agreed to maintain a high degree of transparency about convergence progress by reporting progress against planned convergence milestones. They will report progress quarterly with the next report being published in July 2010.

SEC Views on IFRS – Part 1

The SEC held a public meeting on February 24, 2010 to express its support for a single set of high quality global accounting standards. Over the coming weeks I will be posting summaries of some of the views published by the SEC in its Release numbers 33-9109 and 34-61578

In its expression of support the SEC stated that a single set of high-quality globally accepted accounting standards is consistent with the its mission of protecting investors, maintaining fair, orderly and consistent markets, and facilitating capital formation. The commission reiterated its support for continued convergence between US GAAP and IFRS and acknowledged that IFRS is best positioned to become the single global accounting standard.

The commission last addressed the topic of convergence when it released a proposed Roadmap to IFRS in November 2008. The proposed Roadmap set forth seven milestones toward eventual adoption of IFRS. However, the commission stopped short of proposing a date certain for adoption and instead stated that it would make a decision about adopting IFRS by 2011. The seven milestones set forth in the proposed Roadmap to IFRS are as follows (see IFRS Roadmap Milestones):

IFRS Roadmap Milestones

• Improving Specific Accounting Standards
• Improving the Structure and Funding of the IASB
• Facilitating the use of interactive data (XBRL) under IFRS
• Updating the Education and Licensing of U.S. Accountants
• Evaluating the early adoption experiences of a limited group of companies
• Timing of future rulemaking
• Sequencing of companies required to use IFRS

The Roadmap generated comments from a diverse group of investors, issuers, accounting firms, regulators, educators, and others as to what factors the SEC should consider as it evaluates IFRS. The SEC has carefully reviewed the thoughts of those who commented on the Proposed Roadmap to IFRS. In my next post I will summarize the SEC’s conclusions regarding the factors it considers particularly important as it continues to evaluate IFRS through 2011.

Preparing for a global accounting standard

Now is the time to prepare for a gradual migration toward a single global accounting standard, especially for multinational companies. As more countries move toward IFRS (like Canada, Japan, Australia and others), companies should determine what the migration to IFRS means for them. In addition, US based companies should stay actively informed about the standards being converged by the FASB and the IASB. Companies should also consider conducting an IFRS impact assessment to determine how a transition to IFRS might impact them. By doing so, companies can plan for a smooth transition to a single global accounting standard.

Financial Crisis Advisory Group on Global Accounting Standards

The Financial Crisis Advisory Group recently issued a letter to the G-20 Group of Nations expressing its support for “a single set of high quality, globally converged financial reporting standards that provide consistent, unbiased, transparent and relevant information across geographical boundaries”. The letter summed up the Financial Crisis Advisory Group’s review of the progress of the International Accounting Standards Board IASB) and the US Financial Accounting Standards Board (FASB) in addressing the recommendations contained in their July 28, 2009 report.

In their July 2009 report the Financial Crisis Advisory Group set forth four main principles and a series of recommendations to improve the functioning and effectiveness of global standard-setting. The primary areas addressed in its July 2009 report include:

• Effective financial reporting
• Limitations of financial reporting
• Convergence of accounting standards
• Standard-setters’ independence and accountability

Harvey Goldschmid, Co-Chairman of the group commented on the report by saying “I urge policymakers around the world to study the report and to take note of its conclusions, especially the importance of broadly accepted accounting standards that are the result of a thorough due process. The report highlights the importance but also the limits of financial reporting. Accounting was not a root cause of the financial crisis, but it has an important role to play in its resolution.”

FASB and IASB to Meet Monthly on Convergence

Bob Herz

The FASB and the IASB plan to meet every month in order to complete accounting standard convergence by June 2011. The monthly meetings are necessary as the chairmen of the two boards focus on their efforts to reconcile US and international accounting standards

FASB Chairman Robert Herz and IASB Chairman Sir David Tweedie held a three-day meeting at FASB headquarters in Norwalk, Conn. In late October to resolve difficult differences in areas such as fair value measurement, revenue recognition, asset impairment and financial statement presentation. During their meeting, they set a series of milestones for when they expect to issue draft standards.

Sir David Tweedie

“We’re going to work on these issues together every month,” said Tweedie. “That’s why we think we’ll make our June 2011 target date.” The June 2011 is important because it was a target set at the G-20 summit in September 2009. During their meeting the G-20 encouraged the development of a single set of high quality global accounting standards.

FASB Chairman Bob Herz commented that the $64,000 question is, “Where are we going with IFRS?” as he described plans for the FASB and the IASB to work more closely on uniting US GAAP with international standards.

The SEC has not yet approved its proposed roadmap to the adoption of IFRS, but is addressing the issue. Commissioner Elisse Walter, in her keynote address to the American Institute of Certified Public Accountants, said that in early 2010 the SEC will determine what to do about the adoption of international accounting standards. SEC staff members are “formulating a recommendation to the commission” based on the comment letters it received on its proposed roadmap to the adoption of IFRS. The commissioner said “I expect we will likely consider further action sometime in early 2010”.

A Decision on the Proposed Roadmap to IFRS Delayed to Early 2010

The SEC’s Chief Accountant had previously given hints that the SEC would clarify its views on IFRS by late December. But now it appears we will not hear what the SEC plans to do with IFRS until early 2010. Commissioner Elisse Walter, in her keynote address to the American Institute of Certified Public Accountants, said that in early 2010 the SEC will determine what to do about the adoption of international accounting standards.
SEC staff members are “formulating a recommendation to the commission” based on the comment letters it received on its proposed roadmap to the adoption of IFRS. The commissioner said “I expect we will likely consider further action sometime in early 2010”
The SEC’s proposed roadmap to IFRS set forth seven milestones base on which the decision to move to IFRS (beginning in 2014) would be ratified or rejected (by 2011) based on milestone progress achieved. The milestones included:

• Improving Specific Accounting Standards
• Improving the Structure and Funding of the IASB
• Facilitating the use of interactive data (XBRL) under IFRS
• Updating the Education and Licensing of U.S. Accountants
• Evaluating the early adoption experiences of a limited group of companies
• Timing of future rule making
• Sequencing of companies required to use IFRS

For more information on IFRS see: IFRS Web Resources

A Certain Future for IFRS

The draft SEC Roadmap to IFRS has been issued and commented upon. Now it is time for the SEC to get to work on making its plans for IFRS clear. Based on recent comments by Chairman Shapiro and Chief Accountant Kroeker, they appear to be moving toward providing clarity on IFRS.

Specifically, SEC Chairman Schapiro revisited the IFRS issue on Sept. 18 when she stated, “I expect we will speak a little later this fall about what our expectations are with respect to IFRS”. She also said “it would be ideal if we can have a single set of high-quality accounting standards that worked globally.” SEC Chief Accountant James Kroeker bolstered her remarks on October 30 at a premier US Conference on International Financial Reporting Standards. During his speech and responding to questions afterward he commented that “There will be follow-up on the roadmap this fall.” Asked to define the word “fall,” he noted that “fall ends on Dec. 21”.

SEC’s Strategic Plan For Fiscal Years 2010–2015

In its strategic In June 2009, the U.S. Department of the Treasury published key objectives for reform of the financial regulatory system. (Financial Regulatory Reform: A New Foundation) Among other things, these reforms focus on raising international regulatory standards and cooperation, including working toward improvement of accounting standards in the wake of the credit crisis and the development of a single set of high-quality global accounting standards.

G20 Leaders

Chief Accountant Kroeker’s remarks contained similar themes as a recent G20 Leadership meeting where the G20 leaders called on international accounting bodies to “redouble their efforts to achieve a single set of high quality, global accounting standards within the context of their independent standard setting process, and complete their convergence project by June 2011.” They also commented that the “International Accounting Standards Board’s (IASB) institutional framework should further enhance the involvement of various stakeholders.”

Whatever you think about IFRS, the future seems sure. The world wants a single set on high quality, global accounting standards and IFRS will be that standard (it already is for the rest of the world).

Prepare Now

What can you do to prepare? Here are a few ideas for your consideration.

• Stay IFRS aware
• Stay aware of SEC action on IFRS
• Learn about the FASB and IASB Convergence efforts
• Analyze the effects of stable, converged IFRS standards on your organization and follow progress on standards still being converged
• Conduct an IFRS impact assessment
• Begin to develop a Judgment Framework that can formalize your processes for making business judgments and accounting standard application judgments.
• Identify internal and external talent that can assist in the transition to IFRS
• Develop a high level plan for transitioning to IFRS
• Begin to identify potential impacts to accounting, tax, technology and other business processes.
• Look for ways to normalize global accounting policies, practices and procedures to reduce the cost of global financial and regulatory reporting. Consider utilizing technologies like XBRL

Are you ready to report results under IFRS?

Update on the SEC’s Roadmap to IFRS

We are still waiting for the SEC to make its decision on the IFRS Roadmap. Thankfully they are beginning to indicate that they are focused on high quality global accounting standards again. Recent comments were made by Chairman Shapiro at the IOSCO Technical Committee Conference in Basel Switzerland on October 8, 2009:

“The crisis has highlighted importance of implementing and enforcing high quality and consistent accounting standards around the world. The SEC has of course played a leadership role in fostering this ideal and I remain committed to the goal of a global set of high-quality accounting standards. I also believe that there are issues that will be critical to address as we at the SEC consider the input we have received on last year’s proposed roadmap on the role of international standards in the U.S. It is with the principles and ideas I just outlined in mind that I am committed to focusing our efforts this fall to following up with a work plan that expands upon the concepts proposed in the roadmap.

The entire text of her speech is at: http://www.sec.gov/news/speech/2009/spch100809mls.htm