IFRS
Standards: Current Situation
Intro About us Sponsors Meetings Completed Stds Membership IFRS: situation history Updated September 2011 [PWC]  In November 2008, the SEC issued a proposed "Roadmap" for a possible path to the adoption of International Financial Reporting Standards (IFRS) in the US. Until February 2010, there had been no further announcement from the SEC on the direction they would take. In February 2010, the SEC published a statement of continued support for a single set of high-quality global accounting standards and acknowledged that IFRS is best positioned to serve in that role.  The SEC's statement described the matters that need to be further analyzed and the events that must occur between then and 2011, when the SEC expects to make a determination on whether or not to further incorporate IFRS into the US public markets.  The statement included details of a work plan to be executed by the SEC staff to enhance the Commission's analysis of the implications of a change to IFRS. The work plan identified six key areas of consideration: •	Sufficient development and application of IFRS for the US domestic reporting system; •	The independence of standard setting for the benefit of investors; •	Investor understanding and education regarding IFRS; •	Examination of the US regulatory environment that would be affected by a change in accounting standards; •	The impact on issuers, both large and small, including changes to accounting systems, changes to contractual arrangements, corporate governance considerations and accounting for litigation contingencies; and •	Human capital readiness The first two areas consider the characteristics of IFRS and whether it should be further incorporated. The remaining four areas relate to transitional considerations to better evaluate when and how to effectively incorporate IFRS into US financial reporting. The SEC also committed to issuing regular public updates on the progress of its work plan. In October 2010, the SEC published its first such public update, largely summarizing its progress to date in each of the work plan's six areas. Although there were no major changes or developments, the SEC did commit to further updates and remained committed to a decision in 2011 on the future role of IFRS in the US In early December 2010, at the American Institute of CPAs (AICPA) annual conference, SEC Chairman Mary Schapiro dismissed speculation that the SEC would make a decision on IFRS by June of 2011, indicating simply that a decision would likely come during the calendar year. Also of note, she mentioned that the wide-ranging Dodd-Frank Act would have little or no bearing on the IFRS decision, and that the SEC would allow a "minimum of four years" for any transition to IFRS. More recently, in May 2011, the SEC staff released a paper that invites dialogue as to how an endorsement mechanism for IFRS incorporation might work in the US. First, it describes a slower process of incorporating IFRS into the US financial reporting system, with an ultimate objective of US standards being compliant with IFRS. The FASB would change US GAAP over a defined period perhaps 5-7 years by endorsing, and thereby incorporating, individual IFRS standards into US GAAP. Existing IFRSs would be categorized into three groups for incorporation, with the goal of minimizing the transition impact to US issuers while providing useful information to investors. The categories are: 	1.	Standards subject to current convergence projects, such as revenue and leasing; 	2.	Standards that are expected to change in the near future; and 	3.	All other standards including those that are not anticipated to undergo significant change. The FASB would analyze the third group in an attempt to determine an approach to change that would minimize the effect on US issuers. One goal of the suggested approach is to allow prospective application of new requirements whenever possible. Another objective would be to avoid differences, but the endorsement mechanism would allow the FASB to modify or supplement IFRS, in the rare instances necessary to protect US investors. An option to voluntarily adopt full IFRS was beyond the scope of the paper. The staff paper also describes the role of the SEC and the FASB. The SEC would: •	Maintain its statutory oversight of the FASB; •	Actively share its standard setting perspectives with the IASB; •	Contribute to the oversight and governance of the IASB through its participation on the IFRS Foundation Monitoring Board;  •	Maintain the ultimate authority under US securities laws to prescribe accounting principles and standards to be followed by US issuers The FASB would continue as the US national standard setter, and would participate in the development of new standards, but the nature of its participation would differ from today. Rather than acting as the principal standard setter for new standards, the FASB would play an instrumental role by providing input and support to the IASB in its mission to develop high-quality, global standards. Through this active involvement with the IASB, it is expected that US modifications to new standards issued by the IASB would be avoidable except in rare instances. A key element of the FASB's role is to develop a transition plan to effect the necessary changes over the next 5-7 years. The SEC held an IFRS roundtable in Washington, DC, on July 7, 2011, to discuss the benefits and challenges of potentially incorporating IFRS into the US financial reporting system. At the event, SEC Chairman Mary Schapiro called the idea of IFRS in the US “a major decision for this agency, and not one to be taken lightly.” October 2011 - Boston: the chairman of the IASB, Hans Hoogervorst said at the IFRS Foundation/AICPA conference that the US share of global capitalization has shrunk from 45% in 2006 to 30% because of the growth in other parts of the world. He said, “I believe the direction of travel for IFRSs is established, the momentum unstoppable and the endpoint is clear. Ultimately there will be a global language and IFRS is the only candidate.”  At the same conference, Harvey Goldshmid who co-chaired the Financial Crisis Advisory Group with Hans Hoogervorst, entitled his remarks, “U.S. Incorporation of IFRS is a National Imperative.”  He asked the rhetorical question, “What if the SEC fails to commit to incorporation . .  or simply says ‘No’? He replied to his own question be saying, {paraphrased} ‘I see two basic scenarios; one that would be bad for the US and the other far worse.  . . In my first scenario, the coalition of nations supporting IFRS would break apart. Rather than have two sets of accounting standards, IFRS and US GAAP, we would have a number of regional GAAPs or we would go back to pre-2000 fragmentation. The second scenario is far worse, The coalition would hold together and the US would become isolated. There would be few, if any, US members of the IASB. The SEC would be removed from the monitoring board and would no longer play the large and constructive role it now plays in IFRS development and oversight.’ So the current situation was that we were awaiting the announcement(s) from the SEC - which was expected before the end of 2011. However, on November 14, 2011 the SEC announced that it will be some months yet before it makes a decision because they are considering it carefully. By that time there will be more progress on the big 3 topics - Revenue, Leases and financial instruments  The IASB and the FASB are at work on joint projects that will certainly bring the two sets of standards closer. IFRS   USA Organization
[Updated January 2012 by Cliff Beacham] On January 24th, International Accounting Standards Board (IASB) Chairman Hans Hoogervorst predicted in a speech in Moscow on Monday that the SEC will adopt IFRS for U.S. issuers. But he said that he and FASB Chair Leslie Seidman think continuing the current process of pursuing convergence on individual projects is not an acceptable way forward. “The U.S. is committed to supporting global accounting standards,” he said. “It is SEC policy, it is U.S. government policy and it is the policy of the G20, in which the U.S. is a key player.”  
Updated March 2013 by Cliff Beacham] Leslie Seidman has announced that the Norwalk agreement is over as far as working to jointly issue standards. However, a ‘forum’ is to be established so that cooperation in the future ‘assured.’ Hans Hoogervorst has said the IASB canot wait for the US and will never change its stance of Principles Based standards. So does the future seem bleak? This is a setback but, in the end, we need a common basis. For the next few years companies in an international situation will have to continue preparing two sets of accounts. Major ERP developers are marketing the ability to maintain multiple ledgers.  This will bring further challenges and there could be lots of work for accountants on the horizon. While an ‘Enter once and post to different systems’ make seem to make sense the preparation of financial statements will necessitate different knowledge and experience that the US does not, at present, have. Companies (such as Nestles are based in Switzerland but have significant US operations) will have to meet these challenges while the FASB does not get involved and focuses only on the US bit - “it’s not our problem!” The need is there, we will find the solution but we may have to wait awhile. The current situation is that we are awaiting further exposure drafts in 2013 for Leasing while the Revenue Recognition standard will be released as 2 separate standards in the US and Internationally but will be nearly identical (unless someone changes their minds).
Turn to the continuation on the next page for the current situation!