CPA Resources
CPA Resources

SEC offers roadmap to global accounting standards

WASHINGTON, Aug. 27, 2008 — The Securities and Exchange Commission has voted to publish for public comment a proposed roadmap that could lead to the use of international financial reporting standards (IFRS) by U.S. issuers beginning in 2014.

Currently, U.S. issuers use U.S. generally accepted accounting principles (U.S. GAAP). The SEC would make a decision in 2011 on whether adoption of IFRS is in the public interest and would benefit investors. The proposed multi-year plan sets out several milestones that, if achieved, could lead to the use of IFRS by U.S. issuers in their filings with the SEC.

The increasing integration of the world's capital markets, which has resulted in two-thirds of U.S. investors owning securities issued by foreign companies that report their financial information using IFRS, has made the establishment of a single set of high quality accounting standards a matter of growing importance. A common accounting language around the world could give investors greater comparability and greater confidence in the transparency of financial reporting worldwide.

"An international language of disclosure and transparency is a goal worth pursuing on behalf of investors who seek comparable financial information to make well-informed investment decisions," said SEC Chairman Christopher Cox. "The increasing worldwide acceptance of financial reporting using IFRS, and U.S. investors' increasing ownership of securities issued by foreign companies that report financial information using IFRS, have led the SEC to propose this cautious and careful plan. Clearly setting out the SEC's direction well in advance, as well as the conditions that must be met, will help fulfill our mission of protecting investors and facilitating capital formation."

Cox noted that since March 2007, the SEC and its staff have held three roundtables to examine IFRS, including one earlier this month regarding the performance of IFRS and U.S. GAAP during the subprime crisis. Almost one year ago, the SEC issued a concept release on allowing U.S. issuers to prepare financial statements using IFRS.

The American Institute of CPAs was quick to voice its opinion about the SEC's proposal.

“The AICPA supports one set of high-quality global accounting standards for public companies,” said AICPA president and CEO Barry Melancon.  “We believe the capital markets ultimately will insist on IFRS for public companies. (This) action by the SEC continues a robust and thoughtful debate that is critical as the transition occurs.”

The AICPA believes the following are key steps, among others, for a smooth transition:

  • Ongoing collaboration between the Financial Accounting Standards Board and the International Accounting Standards Board to achieve convergence.
  • Preparation for the shift to IFRS-based reporting using eXtensible Business Reporting Language (XBRL).

“A critical initial step is the development of a project plan that directs all components of the financial reporting system toward achieving the milestones laid out by the SEC,” said Arleen Thomas, the AICPA's senior vice president – member competency and development. “The AICPA will work closely with the FASB, the IASB and the International Accounting Standards Committee Foundation to help bring these milestones to fruition.  We are working with our members, both preparers and auditors, on IFRS to help them prepare for what’s ahead.”

More than 100 countries around the world, including all of Europe, currently require or permit IFRS reporting. Approximately 85 of those countries require IFRS reporting for all domestic, listed companies.

Public comment on the SEC's proposing release should be received by the SEC no later than 60 days after its publication in the Federal Register.

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