SEC Releases Staff Paper on a Possible Incorporation of IFRS into U.S. GAAP
In order to consider the factors relevant to a Securities and Exchange Commission (SEC) determination as to whether, when, and how the current financial reporting system for the U.S. should be transitioned to incorporate International Financial Reporting Standards (IFRS), on May 26, the SEC released a “Work Plan for the Consideration of Incorporating International Financial Reporting Standards into the Financial Reporting System for U.S. Issuers.”
The paper makes it clear that the SEC has not made the decision to adopt or incorporate IFRS, but is actively exploring the pros and cons of incorporation. The paper also makes it clear that the U.S. Generally Accepted Accounting Principles (GAAP) would be retained, but the Financial Accounting Standards Board (FASB) may incorporate IFRS into the U.S. GAAP over a defined period of time, with a focus on minimizing transition costs, particularly for smaller issuers.
This SEC framework is presented to illustrate that:
- The decision faced by the Commission in an effort to achieve a single set of high-quality, globally accepted accounting standards is not necessarily a binary decision (i.e., either to require the use of IFRS by all U.S. issuers immediately or not);
- Incorporation of IFRS is not inconsistent with the SEC maintaining its ultimate authority over U.S. accounting standard setting; and
- There are potential ways to accomplish the broad objective of pursuing a single set of high-quality, globally accepted accounting standards while minimizing cost, effort, and other transition obstacles.
These changes, if and when enacted, are likely to require accountants to use certified appraisers.
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By: Present Value
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SEC: Companies Will Need Time to Adopt International Financial Reporting Standards (IFRS)