The Many Interpreters of IFRS

After the International Accounting Standards Board hands off its rules to companies, who ensures the consistency of their application?

Still, European companies privy to SEC inquiries are often taken aback at the U.S. regulator’s heavy-handed questions, according to Andrew Bernstein, a partner in Cleary Gottlieb’s Paris office. In fact, they are often “offended” that they have two regulatory bodies reviewing their financials. For example, former AstraZeneca CFO Jonathan Symonds accused the SEC of acting as a “judge and jury” over international companies’ financial statements after he and other European CFOs received extensive queries from the SEC about their IFRS-prepared filings.

At the same time, some companies have found the SEC’s questions to be informative. “A lot of the companies I represent say, when they get their SEC comment letters, ‘Boy, I don’t want to deal with all these questions,’” Bernstein told “But they also say, ‘These are good questions that we should have asked ourselves internally.’”

According to Koster, the SEC and the rest of the world are still in a transitional phase of getting used to looking at IFRS-prepared financial statements. Most of the questions that have arisen have been technical rather than interpretative issues, he adds.

To be sure, the SEC is wielding some influence over the future of international standards by restricting the IFRS-based filings it does allow to those based on the IASB’s version of the rules and those that involve a home-country modification. By doing so, the commission is agreeing with IASB’s push to keep the standards clean and promoting the concept of a single set of globally accepted accounting standards. Critics of the reconciliation-elimination proposal had wanted the SEC to broaden its allowance to the version of IFRS approved by the European Union.

The creeping influence of the SEC on foreign companies’ financial affairs and its push for bringing the international standards into the United States has generated some fear over the commission’s motives. IASB chairman David Tweedie acknowledged to recently that Europeans worry the SEC aims to become the world’s regulator, as evidenced for example by its search for an overseas office. However, according to SEC spokesman John Nester, the office would be used for travel purposes for staffers attending meetings rather than as a far-flung location for overseeing or enforcing SEC policies.

These concerns about the SEC are unwarranted, according to Campos, who recently resigned as SEC commissioner after spending his five-year tenure as a liaison between the U.S. regulator and its international counterparts. The SEC’s goals do not include recognition as a world regulator, he told

Moreover, Campos notes that while Europeans pushed for the elimination of the GAAP reconciliation requirement, they are recoiling at the SEC’s other IFRS-related proposal to give U.S. companies the option of using IFRS rather than U.S. GAAP. “For no particular reason, they worry that the U.S. is trying to capture IFRS and make it into something that is more like U.S. GAAP, something that is more in U.S. control,” he says. “That is not the case.”

In truth, the SEC is trying to respond to its registrants that have a global presence and may find using IFRS more practical to use than GAAP as they continue to do business abroad, Campos says. For that reason, he predicts the SEC will give U.S. companies the option of using IFRS before the convergence project is completed.


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