IFRS Timetable Not on Time

When will the SEC publish the timetable for switching from GAAP to international accounting standards?

Talk about being upstaged. Only a month ago, the announcement by the Securities and Exchange Commission that it planned to switch U.S companies from U.S generally accepted accounting principles (GAAP) to international financial reporting standards (IFRS), starting in 2010, was the talk of the town. Now, with SEC chairman Christopher Cox preoccupied with Wall Street blow-ups and calls for his resignation—and with no follow-up from the SEC in the form of a proposed timetable published in the federal register—some observers are wondering whether the accounting conversion will stall.

The SEC says releasing the timetable is just a matter of, well, timing. A spokesperson notes that the commission voted unanimously to go forward with the conversion, and that the timetable is expected to be published in the federal register “in a couple of weeks, if not sooner.” Earlier this month, however, the SEC said it would be out by last week at latest.”

The delay could, of course, be due to resource constraints. But some see deeper issues lurking. “It is hard to believe that [the delay is] because the SEC is too busy with pressing matters concerning the credit crunch,” noted Lawrence Cunningham, law professor at George Washington University, in a recent post to the “Concurring Opinions” blog. For one thing, the SEC has “functionally outsourced” much of the oversight of short sales to the New York Stock Exchange, he pointed out. Also, the SEC has less work to do these days, given that Bear Stearns, Lehman Brothers, Merrill Lynch, Morgan Stanley, and Goldman Sachs are no longer under its supervision.

Cunningham and others suggest Cox may be passively reacting to some of the criticism that surfaced in the wake of his August 27 announcement. Resistance to IFRS has surfaced in a number of quarters, notably from Public Company Accounting Oversight Board member Charles Niemeier. As CFO.com reported on September 11, Niemeier charged that the convergence effort had become one of “capitulation” to hazily defined and subpar standards that would ultimately harm investors.

Investors, too, are now voicing their concerns. In a letter to Congress that primarily lobbied for limits on the bailout bill, Carol Gilden, president of the National Association of Shareholder and Consumer Attorneys, added a plug for GAAP. “As we face and work through a financial crisis of unknown magnitude, the SEC should halt its reckless push to shift America’s corporate accounting system from our proven U.S. rule-based” system to the “more lax and less regulated” IFRS, she wrote.

Regardless of what has created the delay in publishing the timetable proposal, consensus is building that it may come too late for the timetable to unfold in its current form. “Even those who say a release is likely appreciate that there’d be a 60-day comment period, so it’s unlikely the SEC could turn around and do much,” no matter whether Cox finishes his term or resigns early, Cunningham said in an e-mail to CFO.com.

The coming turnover in the White House is likely to push out IFRS implementation far beyond the “date certain” that seemed so close in August. The next SEC chair will likely revise the proposal and call for “more detail, study and evaluation, which will take much more time,” says Cunningham.

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