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Lack of IFRS Taxonomy…an IFRS Adoption Hinderence?

March 10, 2011

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.

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