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SEC Views on IFRS – Part 1

March 13, 2010

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.

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