Chief Accountant of the SEC comments on IFRS in the United States and convergence

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08 May 2015

At a financial reporting conference at Baruch College in New York City, Jim Schnurr, Chief Accountant of the US Securities and Exchange Commission (SEC) gave an update on some of the recent activities of the Office of the Chief Accountant as well as some of the current thinking with respect to convergence and IFRS.

At a US Chamber of Commerce conference in early December 2014, Mr Schnurr had introduced the thought of a potential alternative of allowing domestic issuers to provide IFRS-based information as a supplement to U.S. GAAP financial statements without requiring reconciliation. At the annual American Institute of Certified Public Accountants (AICPA) Conference on Current SEC and PCAOB Developments a week later, Mr Schnurr and Julie Erhardt, Deputy Chief Accountant of the SEC, further discussed this possible option.

Obviously, this new thinking triggered many 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.

However, Mr Schnurr pointed out that although there is still support for the single set of high-quality, globally accepted accounting standards, many constituents tend to see more the lack of convergence and shortfalls in the efforts towards it. Mr Schnurr therefore devoted a large part of his speech to the similarities between IFRS and U.S. GAAP. He cited business combinations and consolidations as well as revenue recognition as cases in point. On the leasing and credit impairment standards he admitted the differences but also stressed that the IASB and FASB were able to achieve convergence in many significant respects.

Mr Schnurr also highlighted that although the FASB has started adding 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.

Please click to access the full text of Mr Schnurr's speech on the SEC website.

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