A word of advice to those holding their breaths until the Securities and Exchange Commission issues a deadline for U.S. companies to convert from the use of generally accepted accounting principles to international financial reporting standards: exhale.
To judge from the views expressed on Tuesday by SEC Chairman Christopher Cox and other participants in a roundtable held by the commission to assess how well IFRS has performed in the current financial crisis, the possibility of the SEC making such announcement in the next week or so—as many have been expecting—seems remote.
A catchword of late is that it’s no longer a matter of “if” U.S. regulators will adopt IFRS; it’s a matter of when. Speaking at a press conference immediately preceding the roundtable, Cox said, however, “that the question we’re now asking ourselves is, how does [a conversion to a single set of accounting standards] fit in over the longer term, and will U.S. companies ultimately be using IFRS instead of U.S. GAAP?”
That sounds a bit more like “if.” Indeed, Cox appears to have his hands full with other matters over the next few months, making a launch of a definitive wholesale conversion of U.S. accounting standards by Corporate America seem a bit further away than it once did. Cox after all, must break in a trio of new commissioners: Luis Aguilar and Troy Paredes, whom the chairman swore in last Thursday and Friday, and Elise Walter, who assumed her post in mid-July. Also on his very full plate, as he told reporters, were initiatives on naked short-selling, SEC registration, and municipal-securities rulemaking, along with consideration of the 25 recommendations just submitted by the commission’s advisory committee on financial reporting.
Another indication that some more deliberation may be at hand was the abundant criticism leveled at IFRS during the roundtable, including some by those thought to be its best supporters. Investors, for example, have been the biggest proponents of global accounting convergence, contending that a single set of standards makes for more transparent and comparable financial reporting. Jeffrey Mahoney, general counsel of the Council of Institutional Investors, said, however, that at least six conditions should be met by the International Accounting Standards Board, which issues the global standards, before U.S. companies switch to IFRS.
Declaring that there was “some disagreement in the investor community” about when U.S. companies should be allowed to IFRS, Mahoney said that the following questions have yet to be resolved.
•Do international standards produce the same quality of reporting as U.S. GAAP does?
•Would the application and enforcement of international standards in the United States be as rigorous as they are in the case of U.S. GAAP?
•Does IASB have an adequate and stable source of funding that’s not dependent on private donors?
Does IASB have enough full-time, technically capable, and independent staff members?