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SEC chief accountant comments on IFRSs in the United States and convergence

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May 08, 2015

At the Baruch College financial reporting conference in New York City, SEC Chief Accountant Jim Schnurr gave an update on some of the recent activities of the Office of the Chief Accountant as well as the current thinking on convergence and IFRSs.

At a U.S. Chamber of Commerce conference in early December 2014, Mr. Schnurr had in­tro­duced the thought of a potential al­ter­na­tive under which domestic issuers would be allowed to provide IFRS-based in­for­ma­tion as a sup­ple­ment to U.S. GAAP financial state­ments but rec­on­cil­i­a­tion would not be required. A week later, at the annual AICPA Con­fer­ence on Current SEC and PCAOB De­vel­op­ments, Mr. Schnurr and SEC Deputy Chief Ac­coun­tant Julie Erhardt further discussed this possible option.

This new thinking triggered various reactions from con­stituents, including preparers, investors, auditors, reg­u­la­tors, and stan­dard set­ters. Reactions revealed three key themes:

  • “There is virtually no support to have the SEC mandate IFRS for all reg­is­trants.”
  • “There is little support for the SEC to provide an option allowing domestic companies to prepare their financial state­ments under IFRS.”
  • “There is continued support for the objective of a single set of high-qual­ity, globally accepted accounting standards.”

Mr. Schnurr pointed out that although there is still support for developing a single set of high-qual­ity, globally accepted accounting standards, many con­stituents tend to overemphasize the FASB’s and IASB’s convergence failures. Mr. Schnurr therefore devoted a large part of his speech to the sim­i­lar­i­ties between IFRSs and U.S. GAAP, citing business com­bi­na­tions, con­sol­i­da­tions, and revenue recog­ni­tion as areas in which the boards have significantly converged their guidance. Regarding the leasing and credit im­pair­ment standards, he admitted the dif­fer­ences but stressed that the boards have achieved con­ver­gence on many sig­nif­i­cant aspects of these projects as well.

In addition, Mr. Schnurr high­lighted that although the FASB has begun to add more “FASB-only” projects to its agenda, it “still very much considers IFRS in setting its agenda and during its de­lib­er­a­tions.” He concluded:

It is fair to say the FASB and IASB collaborative relationship is at a critical juncture. How often and what kind of interaction is going to occur after the leasing standard is finalized and issued?  What happens to the Norwalk Agreement? Ultimately, how the boards decide to interact in the future is important. I believe that, for the foreseeable future, continued collaboration is the only realistic path to further the objective of a single set of high-quality, global accounting standards.

The full text of the speech is available on the SEC’s Web site.

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