The Securities and Exchange Commission has given businesses two more months to respond to its proposed timeline for moving all U.S. public companies to international financial reporting standards. The extension of its public-comment period could hinder the hopes of the few companies that had wanted to get the go-ahead to apply IFRS to their U.S. filings later this year.
Still, even those companies eager to eliminate their U.S. GAAP-based books asked the SEC in their comment letters to give finance executives — currently busy finishing up their quarterly filings — more time to think about the commission’s 165-page proposal. “The transition from U.S. GAAP to IFRS is not an accounting standard adoption exercise but rather a global project, impacting every facet of a company’s operations,” warned Margaret Smyth, controller of United Technologies Corp. However, she has been publicly encouraging the regulator to give companies the option of using the global rules even before rule-makers finish melding their standards.
Going against Smyth’s wishes are the many factors slowing last year’s momentum toward IFRS eventually replacing U.S. GAAP as Corporate America’s main accounting language. Since former SEC chairman Christopher Cox presented the timeline in late August, the commission has become enmeshed in responding to the financial crisis, the effect on its own reputation from the Bernard Madoff’s alleged Ponzi scheme, and a change in leadership. “The change in administration and in political viewpoints is having an impact on the appetite for IFRS,” says Brian Minnihan, assurance partner with the technology practice at BDO Seidman.
Indeed, Mary Schapiro, who replaced Cox last week, has many concerns about the current roadmap, namely its pace. At her Senate confirmation hearing, Schapiro said, “I will not be bound by the existing roadmap that’s out for public comment.” She also expressed reservations about the independence of the overseas standard-setter that writes IFRS and the quality of the rules themselves.
So far, the SEC has received little feedback about its proposal. As of today, only about 30 comments have been filed, half of which were from finance executives. Many of them solely asked for the SEC to extend its original deadline for public comments of February 19. For example, Kenneth Heintz, chief accounting officer at Northrop Grumman, told the SEC that companies are dealing with their current filings and the recession and need “adequate time for more thorough and thoughtful responses.”
Yesterday, the SEC gave in to Heintz and other finance executives’ requests, extending the comment period to April 20. The delay will “give the public additional time to consider thoroughly the matters addressed by the release,” the commission said in a document on its website dated February 3.
As proposed, the roadmap would let about 110 companies, depending on their size and industry, use IFRS for their SEC filings at the end of fiscal years ending after December 15, 2009. The catch: they would also have to provide an audited GAAP reconciliation report or three years’ worth of unaudited reconciliation reports. Later, large accelerated filers would begin using IFRS in 2014, followed by accelerated filers in 2015, and smaller companies in 2016.