April 19, 2009
I am not convinced that requiring U.S. issuers to use IFRS will enhance investor protection and the efficiency and effectiveness of capital formation and allocation.
IFRS is not a single set of standards. There are numerous legislated carve-outs that require repeal or amending of the standards. It is unlikely, given that the U.S. Congress and lobbyists havs yet to state their objections, primarily the elimination of LIFO, can be accomplished by 2014.
The lack of interpretive guidance is similar to that in the U.S. prior to the formation of the FASB. It was more probable than not that like transactions were accounted for in the same manner unless SEC released guidance, e.g., business combinations under APB 16, and opinion shopping was not unusual. A return to this environment would not enhance investor protection.
There is no mechanism, or SEC statutory authortity, to require non-registrants to use IFRS. The effort and cost to convert could be a "deal breaker" for companies considering an IPO.
Other considerations:
U.S. mulinational corporations currently have systems in place to convert the financial information of foreign affiliates into U.S. GAAP. Is the cost to convert systems and re-train personnel in the best interest of investors, especially given the current economic environment?
Will preparers, auditors and SEC staff be sufficiently trained in IFRS to ensure proper adoption?
Will the requirements of being asked to do more with ever decreasing resources result in a wave of retirements that will decrease the internal control systems?
Would we be better served if the FASB were required to issue standards in plain English?