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Will IFRS Be Mandated Under New SEC Chair White?

April 10, 2013

The new SEC Chairman, Mary Jo White, joins the SEC with decades of experience as a federal prosecutor and securities lawyer. She was nominated to be SEC Chair by President Barack Obama on Feb. 7, 2013, and confirmed by the U.S. Senate on April 8.

When she was the Attorney for the Southern District of New York, Chairman White specialized in prosecuting complex securities and financial institution frauds and international terrorism cases. With her guidance, the office earned convictions against the terrorists responsible for the 1993 bombing of the World Trade Center and the bombings of American embassies in Africa. Chairman White is the only woman to hold the top position in the 200-year-plus history of the Southern District of New York.

Upon nomination, Chairman White commented that “It is an honor to lead the talented and dedicated SEC staff on behalf of America’s investors and markets. Our markets are the envy of the world precisely because of the SEC’s work effectively regulating the markets, requiring comprehensive disclosure, and vigorously enforcing the securities laws.”

These comments give us strong clues that the emphasis of this Chairman will be on vigorous enforcement of current securities laws and financial disclosures that are designed to inform and protect investors. It seems unlikely that IFRS will be mandated soon given Chairman White’s focus on investor protection and securities laws enforcement. However, it will be interesting to see how she responds to the international political pressure favoring IFRS adoption.

While the SEC focuses on disclosure and enforcement, US GAAP and IFRS accounting standards continue to converge. So, like it or not, US companies are currently being impacted by IFRS. Among the most significant changes coming our way are the final standard for Revenue Recognition and the re-Exposure Draft for Leases. Both of these standards will significantly impact companies, so the planning and implementation of these standards should be started well in advance of adoption dates.

What should companies consider as these new standards are published and IFRS adoption is considered? First, tone at the top and corporate governance should be addressed so that proper attention is paid to implementation. In addition, it is important to utilize a disciplined project management approach to implementing complex new standards whether they be US GAAP standards or IFRS standards. Early on considering new accounting standards impacts on long term projects like corporate acquisitions, IT infrastructure implementations, long-term tax planning, long term corporate initiatives and the like are very important to consider. Other important considerations in any major new implementation include:

  • Financial results
  • Staff resources
  • Investor relations
  • Internal control environment
  • Compensation plans
  • Contract compliance
  • Training and Communication

Lastly, large multi-national companies may want to consider adopting IFRS as a cost cutting and efficiency effort. Some companies, including Ford Motor Company, are in fact adopting IFRS to save time and money. In a recent webcast, Susan Callahan, Ford’s Global Accounting Policy and Special Studies Manager, stated that Ford is still a consolidated US GAAP SEC Registrant, but found it for more cost effective to convert from one global standard (IFRS) to US GAAP in the corporate office, than to convert form US GAAP to IFRS in 60 different international jurisdictions for complying with local reporting requirements.

What will your company do with IFRS and the new complex Revenue Recognition and Leasing Standards?

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