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SEC Makes Statement in Support of Convergence and Global Accounting Standards

Published on: 24 Feb 2010

Today, in an open meeting, the Commission unanimously agreed to issue a statement expressing its continued support for the development of a single set of high-quality globally accepted accounting standards. The Commission also outlined the next steps in its determination of whether to incorporate International Financial Reporting Standards (IFRSs) into the financial reporting system for U.S. issuers. Further, the Commission recognized that IFRSs are best positioned to be that single set of high-quality global accounting standards and emphasized the importance of the FASB’s and IASB’s convergence efforts.

In its statement, to obtain the information it needs to make a well-informed decision regarding the use of IFRSs by U.S. issuers in 2011, the Commission directed the SEC staff to execute a “work plan” addressing six specific areas of concern. If in 2011 the Commission votes to incorporate the use of IFRSs into the financial reporting system for U.S. issuers, the SEC staff noted that it would recommend sufficient transition time with adoption potentially occurring in 2015 or 2016.

The six key structural, operational, and transitional areas of concern to be addressed by the staff are as follows:

  1. Sufficient development and application of IFRSs globally.
  2. Independence of the global standard-setting process.
  3. Investor understanding and education.
  4. Impact on the regulatory environment.
  5. Impact on issuers (both large and small).
  6. Human capital readiness.

The staff indicated that the first two areas of concern will assist the Commission in its determination of whether to incorporate IFRSs into the financial reporting system for U.S. issuers, while the remaining four areas will assist in the determination of when and how IFRSs may be mandated for use. SEC Chairman Mary Schapiro noted that “the convergence projects currently underway by the FASB and [IASB], must first be successfully completed” before a Commission ruling.

The work plan does not indicate specific timelines or methods for adoption of IFRSs by U.S. issuers. Rather it will be up to the Commission’s rulemaking in 2011 to set out the timeline and determine whether any adoption of IFRSs will be mandatory or optional and for which U.S. issuers.

The Commission asked for transparency of the staff’s actions and directed that frequent public progress reports be issued beginning in October 2010 and thereafter through the completion of their actions.

The impact on U.S. issuers if the SEC incorporates IFRSs into the U.S. financial reporting system would be significant. U.S. issuers can follow this effort by staying informed of the FASB’s and IASB’s convergence efforts and by looking for future public progress reports from the Commission regarding updates on the staff’s work plan.

Stay tuned for an upcoming Deloitte Heads Up newsletter and a special Financial Reporting Dbrief covering the details of the Commission’s statement and work plan.

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