Responses to the Securities and Exchange Commission’s July staff paper on the potential path for U.S. adoption of international accounting financial standards (IFRSs), have stalled until after the Nov. 6 election, two top accounting industry heads indicated at a Sept. 21 meeting of the Financial Accounting Standards Board and the Institute of Management Accountants.
Terri Polley, President and CEO of the Financial Accounting Foundation (FASB’s Trustee organization) told IMA members “everyone is watching what’s going to be happening in Washington to this election and what happens to the composition of the SEC.”
The SEC's five Commissioners are appointed by the President (to a five year term) with the advice and consent of the Senate. No more than three Commissioners may belong to the same political party and one is appointed as Chairman. Already, one Commissioner’s term expired June 5 this year, namely, Elisse Walter, (D) and a second, Troy Paredes, (R ), expires June 5, 2013. The other commissions are:
• Mary Schapiro, Chairman-(D), whose term expires June 5, 2014
• Daniel Gallagher, Commissioner-(R), whose term expires June 5, 2016
• Luis Aguilar, Commissioner-( D, whose terms expires June 5, 2015.
Three Comment Letters So Far.
Polley said that FAF’s Trustees had not as yet formally discussed responding to the staff paper, issued July 13, 2012, but would consider it “over the next couple of months.”
The SEC staff paper was a final report of what issues the Commission should look at to evaluate any recommendation for possible adoption of IFRSs in the United States. It summarizes all of the work and analysis since 2010, but does not offer any recommendations or options for IFRS. Since its issuance, the SEC received three comment letter responses, according to its website listing of such letters Oct. 5.
Both Polley and IMA Committee Chair Nancy Schroeder, stated that the content of the SEC’s report did not come as a surprise. It was one topic, that the IMA did not discuss in its closed meeting session, nor did members discuss whether the committee would comment, said Schroeder, CPA from Beacon Financial Consulting, LLC. “What’s in there is not very surprising to the committee and we’re also anxiously awaiting what’s going to happen in Washington,” she said.
No Timeframe set for Further Work.
Typically in an election year, an issue such as U.S. adoption of IFRS would fall on a “backburner” status, practitioners have said. Driving that viewpoint even further in the coffin—at the quarterly meeting of the FASB’s Advisory council Oct. 2, an SEC senior associate chief accountant, Jenifer Minke-Girard, said “at this point in time, there really isn't a timeline for further work” on IFRS.
The general climate among U.S. accounting practitioners appears to be one of disappointment that the SEC still has not specified what direction it will take. Some have expressed feelings of uncertainty regarding the issue. Overseas, the International Accounting Standards Board’s Chairman, Hans Hoogervorst and the head of the European Financial Reporting Advisory Group's Technical Experts Group, both expressed disappointment that the SEC report did not strongly support use of IFRS.
The initial November 2008 road map, indicated it was proposing a path for evaluating the further role of IFRSs in the U.S. capital markets.
This road map stated: subject to an assessment of the milestones and other considerations, and after consideration of public comment, the Commission could be in a position in 2011 to decide whether to require the use of IFRS by U.S. issuers beginning in 2014, potentially allowing earlier use by certain U.S. issuers beginning with filings for fiscal years ending on or after December 15, 2009.
In May 2011, the SEC issued a staff paper titled, Work Plan for the Consideration of Incorporating International Financial Reporting Standards into the Financial Reporting System for U.S. Issuers Exploring a Possible Method of Incorporation. This paper included the ‘‘condorsement approach,’’ a process of gradual adoption of specific parts of IFRSs over transition periods and coined a new industry buzz word.
It has been years after all leading up to it, and the SEC should have had its decision by now, some practitioners have felt. Still, that viewpoint is not unanimous, with many agreeing that the SEC needs to take its time.
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