The document published today summarises the IFRS Foundation staff’s assessment of the observations included in the SEC final staff report Work Plan for the Consideration of Incorporating IFRSs into the Financial Reporting System for U.S. Issuers published on 13 July 2012.
The Trustees had asked especially that:
- In order to maximise the benefit of the analysis to both the IASB and the international community, IFRS Foundation staff should evaluate the US research within an international context.
- Staff should draw upon other credible sources of information. This should include academic research, as well as relevant documentation and experience from other jurisdictions that have already completed their own transitions to IFRS.
- Staff should identify opportunities to further enhance the activities of the IFRS Foundation and the IASB on the basis of the findings of both the SEC staff report and the other studies.
While acknowledging that many points in the SEC report are correct and welcoming the comments made, the IFRS Foundation staff makes additional points that supplement or in some cases even contradict the findings by the SEC staff. Among these points are following:
Funding: At least 69 jurisdictions provide financial support for the work of the IFRS Foundation, not "fewer than 30 jurisdictions", as maintained in the SEC report. Furthermore, the staff of the IFRS Foundation points out that the United States contribution to the operational budget of the IFRS Foundation seems to be calculated too favourably and should be corrected down. Ultimately, the lack of public funding in the US which is made out in the SEC report would be something that can only be resolved by the US authorities themselves, directly or indirectly, and should not be laid at the IFRS Foundation's door.
Comprehensiveness: In response to the SEC staff's belief that industry guidance should not be removed from US GAAP until the IASB has had the ability to evaluate fully such guidance and to address any voids in IFRS, the staff of the IFRS Foundation points out that the IASB has always advocated financial reporting requirements that account for transactions and activities across industries, rather than developing industry-specific guidance. It is also pointed out that, in 2008, the SEC published the findings of the Pozen Report, which recommended that industry-guidance should be eliminated from US GAAP to reduce avoidable complexity.
National standard-setters: In response to the SEC staff's recommendation that the IASB should extend and formalise its involvement with national standard-setters, the staff of the IFRS Foundation points out that the IASB has begun preparatory work to establish an Accounting Standards Forum (the Forum) comprising national standard-setters and other regional bodies as envisaged in the IFRSF Trustees’ Strategy Review Report.
Issues related to adoption, endorsement and transition: In response to various issues related to incorporating IFRS into US GAAP included in the SEC staff report, the staff of the IFRS Foundation points out that many IFRS jurisdictions have dealt with different issues while adopting IFRS and have shown that there are that there are no insurmountable obstacles for adoption of IFRSs by individual jurisdictions and the experience of the international community of making the transition to IFRS would provide the provide SEC with an important resource to draw upon.
Although the IFRS Foundation staff's report makes the above comments on the findings in the SEC staff's report, it also agrees with many other findings and welcomes the contribution the SEC staff has made to ensuring the continued success of the IFRS Foundations work:
In conducting this analysis, the IFRS Foundation staff have concluded that the SEC Staff Report provides a valuable contribution to the already extensive body of research and information on IFRS. It not only informs the discussion in the US on whether, and if so, how IFRS could be incorporated into the US financial reporting system, but it makes an important contribution to the IFRS Foundation’s evaluation of its own strategy, governance and activities.
Please click for the following documents on the IASB website: