Securities and Exchange Commission officials continue to talk about the importance of creating a unified set of global financial reporting standards, but lately, some steam seems to have gone out of the agency’s push.
Last week, the SEC finally issued its long-promised roadmap for the mandatory adoption of international financial reporting standards (IFRS) by U.S. public companies, now proposed to occur by 2014. The SEC originally announced its plan to issue the roadmap on August 27. And even before that date, corporate finance departments and colleges were crying out for a firm date so they could begin to design new accounting education programs and plan for the transition.
But the actual issuance was a quiet one, coming on a Friday evening and without an accompanying press release. The eagerly anticipated document was published in the Proposed Rules section of the SEC’s website, but is not flagged on the home page.
This week, in sessions at the Financial Executives International conference in New York, SEC officials lauded the potential benefits of global standards, but mentioned the just-issued roadmap only in passing. In the keynote address on Tuesday, chairman Christopher Cox referred mainly to the proposal’s cautionary language making it clear that mandatory adoption of IFRS is not a done deal. It will happen “if the commission believes it to be in the public interest and consistent with the protection of investors,” he noted. That decision is scheduled to be made by 2011.
To be sure, some observers have opined that the SEC is too far down the convergence road to turn back. But in his speech, Cox, a longtime champion of unified accounting standards who has said he will leave his post early next year after Barack Obama appoints a successor, pointed to a window that’s been left wide open for a potential retreat. “The proposed roadmap is cautious and careful. It is a multi-year plan that lays out both the basis for considering the use of IFRS by U.S. issuers, and several important milestones that would have to be achieved first,” he said.
The decision will hinge on progress made in the convergence project between the U.S. and international standard-setters; the level of IFRS education in the United States; the International Accounting Standards Board’s stability; and the consistent application of IFRS worldwide. More than 100 countries have adopted IFRS, but many have made country-specific changes to IASB’s version of the rules.
Cox, who spoke for only 25 of a scheduled 50 minutes, did not offer companies any advice for making the conversion to IFRS. He did not take any questions from the audience and did not attend a brief media session the SEC held after the scheduled conclusion of his address.
Cox’s speech and hasty exit did not sit well with some attendees. “A lot of people came to FEI to hear from Cox on IFRS, because they’re panicked about converting,” said Andrew Reina, practice director for Ajilon Finance Solutions, who was the controller of the big temporary staffing firm’s parent company until four months ago and is a former investment banker. “But there was a lack of direction and guidance in his speech, and he left without addressing people’s concerns. It was a shock and disappointing to a lot of people I talked to.”