Recently, the Securities and Exchange Commission (SEC) put an end to long awaited speculation on when it will adopt and follow International Financial Reporting Standards (IFRS). The overdue final staff report on the IFRS work plan will not contain any information about when and how United States will make a transition from present GAAP accounting to IFRS, says SEC spokesman John Nester. “Staff has been working on a report and separately developing a recommendation,” he says, “The report is nearing completion but staff have not established a timetable for completing a recommendation.” This means there is no set deadline as to when SEC will adopt IFRS.
This was a self made complexity created by SEC, as in 2010 it only directed its staff to create and execute a plan “to enhance both understanding of the Commission’s purpose and public transparency in this area”, after it supported global accounting standards and convergence in a published statement.
At that time, the SEC told stated that decision to adopt IFRS depends upon an agreement between the International Accounting Standards Board and the Financial Accounting Standards Board (FASB) on some key accounting standards. This was the main roadblock preventing IFRS adoption, which was expected to be cleared by mid-2011, the previous target date.
Since that occurred, a few papers have been produced by SEC staff covering possible method of incorporating IFRS into U.S. financial reporting, the key differences between U.S. GAAP and IFRS, and how IFRS is applied in other countries. But the important final recommendation report is still due.
Even FASB and IASB could not come to terms on few standards for financial instruments, revenue recognition, and leasing. In early 2011, when the final report was not presented, SEC Chief Accountant James Kroeker said the staff would need “a few additional months” to finalize its work. Then again in May, it was heard from SEC staff members only that the final report would be presented to the commission “in a matter of weeks.”
There seems to be no valid reason as to why SEC is delaying its decision on IFRS. It could be to lobbying by industry and investors, who earlier also pushed the date to 2015 for full transition to IFRS, arguing that U.S. companies would need about four to five years to implement the changes successfully.
The rest of the world is rightly moving towards international standards including financial centers such as; Hong Kong and the European Union, but it won’t be fully successful unless US joins . Until then, the United States and global companies will continue complying with two sets of standards, mainly IFRS and U.S. GAAP.