In that case, do you anticipate the SEC announcing a date for U.S. adoption sometime this summer, as some people have said might happen?
Zalm: I can’t speculate on that. That would be nice, but probably the SEC will put forward some conditions if they announce a date. But we’ll have to wait for a communiqué from the SEC.
When do you think the United States would be ready to adopt IFRS? The two most mentioned dates seem to be 2011 or 2013.
Zalm: Well, 2013, I would think may be a date. Could be 2012 or 2014, or whatever. The exact year is not of the essence.
What indications have you received from the SEC that the monitoring group and funding systems you are now working to set up would be sufficient for the SEC to accept IFRS as generally accepted accounting principles and still be in compliance with Sarbanes-Oxley?
Zalm: In our [earlier] roundtable in London, the SEC representatives supported the proposals which we put on the table, so that’s a good sign.
A July 5th article in the New York Times reported that some critics worry that a change to IFRS would “put American investors at the mercy of overseas regulators who enforce weaker rules and may treat investment losses as a low priority.” What are your thoughts on that?
Tweedie: I think it is absolute nonsense. The SEC is going to look at the accounts that are coming in. And remember, the countries around world aren’t just going to throw away their own accounting standards if they thought we were bringing out a set of standards that aren’t very good.
Interestingly enough, we have been looking at disclosures on IFRS and U.S. GAAP, just on a sample basis. Actually, you get far more disclosures under IFRS than you do under U.S. GAAP.
The same article said the rules “give companies greater latitude in reporting earnings” and say on average companies report higher earnings using IFRS. How do you respond?
Tweedie: It would be quite interesting to see how they’ve done that research. You’d have to restate everything back into U.S. GAAP [to prove that]. Undoubtedly the standards have slight differences. One of the things we’ve been doing is looking, with FASB, at five areas where there are fundamental problems with the standards and trying to work out how in fact, within the next three years, we can complete that memorandum of understanding. And by that time, U.S. accounting and IFRS will be very, very similar.
We reported recently on the FASB mid-year update in which FASB member George Batavick said financial statement presentation, lease accounting, and several of projects have been accelerated, which he said was being accomplished through “dramatic scope change.” For example, he said the lease accounting project now will focus only on lessee accounting, not that of lessors. Will you still be able to reduce the substantial differences between IFRS and U.S. GAAP if these projects have been slimmed down?