On February 24, 2010, the U.S. Securities and Exchange Commission ("SEC") issued a statement (the "Statement") reaffirming its belief that a single set of high-quality, globally accepted accounting standards would benefit U.S. investors and facilitate cross-border capital formation.
The Statement follows the SEC's release in November 2008 of a series of milestones, otherwise known as the proposed Roadmap, to guide it in determining whether to require U.S. domestic issuers to use financial statements prepared in accordance with international financial reporting standards ("IFRS") in the reports they file with the SEC. The Roadmap contemplated that in 2011 the SEC would be able to decide whether to require the use of IFRS by some U.S. issuers beginning in 2014. The Roadmap also contemplated allowing certain U.S. issuers to voluntarily use IFRS in filings for fiscal years ending after December 15, 2009, but this has not been implemented.
After reviewing more than 200 comment letters regarding the proposed Roadmap, and recognizing the magnitude of the task in transitioning U.S. issuers to IFRS, the SEC concluded that substantial additional work was necessary before deciding whether to incorporate IFRS into the U.S. financial reporting system for U.S. issuers. As a result, the SEC directed the staff of the Office of the Chief Accountant, in consultation with the other divisions and offices of the SEC, to develop and carry out a Work Plan setting forth specific areas and factors for the staff to consider in connection with a potential transition to IFRS for U.S. issuers, including the scope, timeframe and methodology for the transition. The Work Plan, which is attached as an appendix to the Statement, addresses many of the issues raised by the commentors on the proposed Roadmap, 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.
In the Statement, the SEC directs the staff to provide public progress reports on the Work Plan and the ongoing convergence projects being conducted by the Financial Accounting Standards Board ("FASB") and the International Accounting Standards Board ("IASB") no later than October 2010, and frequently thereafter until the work is completed. Following completion of the Work Plan and the ongoing FASB and IASB convergence projects as anticipated in 2011, the SEC expects to be able to determine whether to incorporate IFRS into the U.S. domestic reporting system. If it does so at that time, the SEC anticipates that 2015 or 2016 would be the first year in which U.S. issuers would be required to report under the new system.
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