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SEC representatives stress importance of international standard setting

  • Speech — gray Image

Jun 02, 2013

In speeches delivered at the 32nd Annual SEC and Financial Reporting Institute Conference in Pasadena, CA, Paul A. Beswick, the chief accountant at the SEC, and SEC Commissioner Elisse B. Walter spoke about (1) why the United States needs a strong IASB and (2) high-quality financial reporting.


Paul Beswick

Among the topics Paul Beswick focused on were "Why the U.S. needs a strong IASB and what are we doing about it" and "Definition of a successful implementation of an accounting standard."

In his remarks, Mr. Beswick claimed that the United States has a vested interest in IFRSs simply because it is heavily invested in companies that prepare their financial statements using IFRSs. Stressing the trust the SEC places in the IASB, Mr. Beswick highlighted that the SEC accepts IFRSs as issued by the IASB (for foreign private issuers) without any ongoing endorsement mechanism or suitability test while most other large jurisdictions have some sort of endorsement mechanism in place. According to Mr. Beswick, "this represents a significant amount of confidence placed in the IASB as an institution, and its governance, to produce high-quality accounting standards."

There are a number of things the SEC does to protect investors who are investing in entities with financial statements using IFRSs within U.S. markets, which, as Mr. Beswick claims, "are also network benefits to the global financial reporting community at large." These are:

  • Helping to ensure that the IASB’s standards are the highest quality standards possible (e.g., through being a member of the IFRS Monitoring Board).
  • Observing the IASB's standard-setting process.
  • Following all the IASB’s standard-setting projects and providing feedback on them when appropriate.
  • Participating in working groups of the IASB.
  • Helping to ensure that IFRSs are consistently applied.

Mr. Beswick also pointed out that the United States (through the FASB) is also a member of the IASB’s new Accounting Standards Advisory Forum (ASAF).

Turning to convergence and the joint projects of the FASB and IASB, Mr. Beswick stressed that successful implementation of accounting standards is also a paramount part of convergence.

I think a successful implementation is when the standards are applied consistently among registrants and their auditors to the benefit of investors. To the extent there are judgments applied, the standards should result in those judgments being clearly disclosed to investors so they can factor that into their analysis.

In this context, Mr. Bewswick also said he was encouraged by the FASB's plans to create a transition resource group to facilitate implementation of the standards. As Russell Golden, incoming FASB chairman explained later in the day, the groups will focus on issues related to education, amendments, and interpretation and will include FASB and IASB members as well as representatives from preparer, auditor, and investor communities. Generally, Mr. Beswick remarked that he thought it would be helpful for the FASB and the IASB to provide long implementation periods on the joint projects given the amount of effort that will be required to implement them successfully.

Click here for the full text of Paul Beswick's speech on the SEC's Web site.


Elisse Walter

Later in the day, during a keynote luncheon speech, Elisse Walter also commented on the FASB-IASB convergence projects that she called a positive development that will serve investors the world over. Noting that convergence does not stop at publishing harmonized standards, Ms. Wlater was hopeful regarding IFRSs and the United States:

And, finishing the convergence projects is, of course, not the end of the story for the United States and IFRS. I continue to look forward to a day when there is one set of global accounting standards.

Similar to Paul Beswick, Ms. Walter claimed that successful implementation is the first hurdle to clear, and she outlined four pillars that would support a successful implementation:

  • Training across all constituents at all levels.
  • Providing resources that companies can devote to updating their financial reporting systems in the wake of these changes.
  • Identifying interpretative issues (e.g., through the envisaged implementation group).
  • Focusing on investor understanding.

Click here for the full text of Elisse Walter's speech on the SEC's Web site.

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