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Wednesday, May 18, 2011

Time to 'Roll Up Sleeves' on Details of IFRS Plan

Less than a month after being installed as chief accountant for the Securities and Exchange Commission, James Kroeker sat down with BNA senior accounting correspondent Steve Burkholder for an on-the-record interview, the transcript of which was published in the Oct. 2 issue of Accounting Policy & Practice Report.

The interview covered a wide range of topics--from Kroeker's key priorities, to what the SEC can do to support the IASB-FASB convergence effort, to the so-called religious war over fair value. 

But the first issue Kroeker raised, as he had done in several other public statements around the time of the interview, was the SEC's renewed interest in addressing its proposed road map for moving to international financial reporting standards.

There's still a lot of work to do in that effort, Kroeker said, observing that comments on the proposed road map underscored that there are a lot of unresolved issues.

Among the yet-to-be resolved issues named by Kroeker:

  * use in the United States of LIFO accounting, which is not permitted under IFRS,

  * bank regulatory capital requirements that currently are tied to U.S. GAAP,

  * U.S. GAAP  embedded in U.S. legal contracts,

  * the impact of differences in IFRS, such as in its contingencies standard, on the U.S. legal environment (perhaps resulting in increased litigation), and

  * independence of the International Accounting Standards Board, particularly in regard to funding of the international standard-setter.

Unresolved questions attending the SEC proposal probably number more than a dozen, Kroeker said.

"So, I think an important part of turning our attention back to the concepts in the proposed road map is identifying each of the critical issues and then embarking upon a work plan to determine . . . 'what are the optimal solutions?' "

"As we think about a global set of standards and the issues that one would need to wrestle through, there is an ambitious amount of work, and a work plan that needs to be embarked upon, to actually roll up our sleeves and think about each of these issues in detail."

The SEC needs to look at each issue and ask, "Is that a critical issue? If not, we move on.  If so, then how do we address that?" Kroeker said.

While the question of whether the United States should transition to IFRS is a large political question, it seems the SEC office of chief accountant also has a lot of little, nitty-gritty questions it has to wrestle with as well.

How do you expect the OCA to do with that? — Susan Webster, managing editor of Accounting Policy & Practice Report

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