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SEC representatives stress importance of international standard-setting

  • SEC (US Securities and Exchange Commission) (dark gray) Image

02 Jun 2013

In speeches delivered at the 32th Annual SEC and Financial Reporting Institute Conference in Pasadena, Paul A. Beswick, the Chief Accountant at the US Securities and Exchange Commission (SEC), and the SEC's Commissioner Elisse B. Walter spoke about why the U.S. needs a strong IASB and on the topic of 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 Beswick claimed that the US has a vested interest in IFRSs simply because it is heavily invested in companies that prepare their financial statements using IFRS. Stressing the trust the SEC places in the IASB he highlighted that the SEC accepts IFRSs as issued by the IASB (for foreign private issuers) without any sort of ongoing endorsement mechanism or suitability test while most other large jurisdictions have some sort of endorsement mechanism in place. According to Beswick, "this represents a significant amount of confidence placed in the IASB as an institution, and its governance, to produce high-quality accounting standards".

Still, there are a number of things the SEC does to protect investors who are investing in entities with financial statements utilising IFRSs within US markets which, as 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 standard setting process
  • following all of the IASB’s standard setting projects and providing feedback on them where appropriate
  • participating in working groups of the IASB, and
  • helping to ensure that IFRSs are consistently applied.

Beswick also pointed at the fact the US (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, 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 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, 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.

Please click for the full text of Paul Beswick's speech on the SEC website.

 

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 harmonised standards she rang a hopeful note regarding IFRSs and the US:

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 she claimed that successful implementation is the first hurdle to clear and she made out four pillars that would support a successful implementation:

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

Please click for the full text of Elisse Walter's speech on the SEC website.

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