The SEC issued statements last year noting it would no
longer mandate that foreign companies trading in the U.S.
market report their financial results based on U.S. generally
accepted accounting principles. Since August of the current
year, it has proposed the "roadmap" that was unveiled
for public comment on November 14, 2008. Opponents of
adoption of the IFRS reporting rules note the massive
costs that restatement of current financial results will
incur. Additionally, many fear that the U.S. government
wants to "outsource" its taxing authority, relieving itself
of the responsibility associated with regulating financial
reporting.
Proponents, including the American Institute of Certified
Public Accountants, feel the change is inevitable as the
U.S. takes its place in the global economy. "We believe
the capital markets ultimately will insist on IFRS for
public companies," noted Barry Malancon, AICPA President
and CEO.
The 20 largest companies in their respective U.S. industries
will be allowed to convert to the IFRS rules sooner. Pending
the outcome of the current comment period and a subsequent
SEC vote, the rules could be on tap to be enforced by
2014.
First-time adopters of the IFRS rules will recognize
and 'derecognize' certain financial statement items to
be compliant with the new criteria. Examples of items
currently recognized by U.S. companies that would be 'derecognized'
under IFRS rules are as follows:
Recognize:
Various reclassifications would be necessary under the
IFRS rules, as well as changes in accounting policies
on recognition and measurement. Given the enormity of
the project, the International Accounting Standards Board
(IASB) has already provided for various exemptions due
to the 'cost versus benefits' model. The exemptions proposed
for various business areas (e.g. business combinations,
cumulative translation differences, etc.) are optional
under IFRS rules, thus adopting companies may revise their
accounting practices/polices retrospectively in future
years, versus incurring all costs in the initial adoption.
With implementation looming for U.S. public companies,
as well as trouble brewing in the global economy, interested
parties would like to know how the issue is finalized.
At present, all opinions seem to point to adoption, perhaps
on the SEC's proposed timeline, as soon as the period
of comment is over.
