SEC Approves Statement on Global Accounting Standards
FOR IMMEDIATE RELEASE
Washington, D.C., Feb. 24, 2010 — The Securities and Exchange Commission today voted to issue a statement that lays out its position regarding global accounting standards and makes clear that the Commission continues to believe that a single set of high-quality globally accepted accounting standards would benefit U.S investors.
As a step toward achieving the goal of a single set of high-quality global accounting standards, the statement notes that the Commission continues to encourage the convergence of U.S. Generally Accepted Accounting Principles (U.S. GAAP) and International Financial Reporting Standards (IFRS) in order to narrow the differences between the two sets of standards.
"For nearly 30 years, the Commission has promoted a single set of high-quality globally accepted accounting standards, which would advance the dual goals of improving financial reporting within the U.S. and reducing country-by-country disparities in financial reporting," said SEC Chairman Mary L. Schapiro. "But supporting this goal is only the beginning of the discussion, not the end."
The Commission also directed its staff to execute a Work Plan, the results of which will aid the Commission in its evaluation of the impact that the use of IFRS by U.S. companies would have on the U.S. securities market. Included in this Work Plan will be consideration of IFRS, as it exists today and after the completion of various "convergence projects" currently underway between U.S. and international accounting standards-setters. By 2011, assuming completion of these convergence projects and the staff's Work Plan, the Commission will decide whether to incorporate IFRS into the U.S. financial reporting system, and if so, when and how.
In November 2008, the Commission proposed a series of milestones (also known as the Proposed Roadmap) that would guide the Commission in determining whether to transition U.S. capital markets to IFRS.
After proposing the Roadmap, the Commission received more than 200 comment letters from a wide variety of market participants, including investors, regulators, issuers, accountants, attorneys, academia, standards setters, and international organizations.
Commenters expressed widespread support for the goal of having a single set of high-quality globally accepted accounting standards, but differed in their views about the approach in the Proposed Roadmap.
Therefore, the Commission's statement indicates that it is important to carefully consider and deliberate whether such a change is in the best interest of U.S. investors and markets.
Among other things, the staff's Work Plan will address many of the issues highlighted by commenters, including:
Determining whether IFRS is sufficiently developed and consistent in application for use as the single set of accounting standards in the U.S. reporting system.
Ensuring that accounting standards are set by an independent standard-setter and for the benefit of investors.
Investor understanding and education regarding IFRS, and how it differs from U.S. GAAP.
Understanding whether U.S. laws or regulations, outside of the securities laws, for example tax laws and regulatory reporting, would be affected by a change in accounting standards.
Understanding the impact on companies, both large and small, including changes to accounting systems, changes to contractual arrangements, corporate governance considerations and litigation contingencies.
Determining whether the people who prepare and audit financial statements are sufficiently prepared, through education and experience, to make the conversion to IFRS.
The SEC staff will provide public progress reports on the Work Plan, as well as the status of the FASB and IASB convergence projects, beginning no later than October 2010 and frequently thereafter until the work is complete.
Commenters on the Proposed Roadmap also expressed a view that U.S. companies would need approximately a four- to five-year timeframe to successfully implement a change in their financial reporting systems to incorporate IFRS. Therefore, if the Commission determines in 2011 to incorporate IFRS into the U.S. financial reporting system, the first time that U.S. companies would report under such a system would be no earlier than 2015. The Work Plan would further evaluate this timeline.
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