A number of finance executives from nonfinancial companies — such as General Electric, Eli Lilly, Cisco Systems, and Best Buy — did write in support of the switch to IFRS, typically expressing some reservations and suggesting changes. Wallace Macmillan, former CFO of Central European Media Enterprises (CME), a Bermuda-based, Nasdaq-listed broadcaster with operations in seven European countries, noted that allowing a domestic registrant like CME to use IFRS makes sense from a “pure efficiency perspective.” “It takes costs and inefficiency out of the system and enhances the control environment,” Macmillan says. (Macmillan spoke with CFO shortly before an amicable departure from CME in the summer.)
None of CME’s local businesses reports under U.S. GAAP locally, requiring an arduous reconciliation process to feed the group-level accounts under American standards. Most of CME’s main competitors report under IFRS. Easier comparability between CME and its rivals would benefit investors, Macmillan says.
One point he wanted to get across in his letter to the SEC was that the regulator was too restrictive in defining the types of companies that would be allowed to use IFRS before 2014. Although he respects “the difficulties of moving such a huge market as the U.S. along this new route,” he is happy for his company to pave the way for others, proving IFRS’s viability by switching as soon as possible.
The letter didn’t elicit a direct response from the SEC, but Macmillan didn’t expect one. The impact of his arguments will be seen when the next stage of the regulator’s IFRS road map is announced, he says. “I’d like to think that they have at least been considered,” the CFO says. “They were intended to be constructive and supportive of the process.”
By contrast, letter-writer David Adante is as opposed to accounting convergence as Macmillan is in favor of it. In a colorfully worded, 11-page letter to the SEC, the CFO of The Davey Tree Expert Co., a $596 million Ohio-based gardening-services firm, calls for the IFRS conversion process to be “indefinitely suspended.” Adante says IFRS proponents are “infatuated” with its principles-based approach, which he warns will lead to dangerous vagueness when it comes to interpreting standards, with “choose-as-you-wish implications” for preparers and higher “Auditor Say-So” costs. The switch to IFRS would cost Davey Tree $2.6 million over the first three years, Adante estimates. These costs, he writes, “will be far in excess of any calculated benefits, real or imagined.”
Similarly, Gretchen Haggerty, CFO of U.S. Steel, writes that switching to IFRS would cost the company “tens of millions of dollars and require significant internal resources” — money and resources U.S. Steel cannot afford, she says, given the global economic and financial crisis.
Haggerty specifically objects to IFRS’s ban on last-in, first-out (LIFO) inventory valuation, which would result in U.S. Steel and other companies paying “significant cash tax payments.” “For this reason, U.S. Steel will not support a transition to lFRS until there is a definitive solution to handling LIFO which does not have a negative financial impact,” she writes.