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Will US IFRS Transition Be Delayed?

January 17, 2009

The political changing of the guard is here. Part of that change is the installation of a new SEC chairman, Mary Shapiro, who has signaled that she may delay the planned US transition to IFRS.

Chairman Christopher Cox has been an advocate for IFRS. The SEC published a Roadmap to IFRS that is still open for comment. The Roadmap, which would require large, accelerated filers to convert to IFRS by 2014 and all public filers to convert to IFRS by 2016, was approved late last year. See “SEC Publishes Proposed IFRS Roadmap”. Companies are concerned about the cost of converting to IFRS. The SEC estimates that the cost of conversion could total $32 million for the largest companies. Other studies suggest that the cost ranges from .03% to .05% of revenue.

Chairman Shapiro told the Senate Banking Committee “I will take a deep breath and look at this entire area again carefully and I will not necessarily feel bound by the existing roadmap that is out for public comment,” She also said “I would proceed with great caution so we don’t have a race to the bottom,” and added “I have some concerns about the IFRS standards generally.” Schapiro observed that IFRS is “not as detailed as the U.S. standards.” Its lack of “details” is by design as IFRS standards are based on broad professional principles. US GAAP, in contrast, is heavily laden with rules for every situation. Depending on your viewpoint, the fact that IFRS is principles based is its strength or its weakness.

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