No U.S. Action Soon on Global Accounting Rules: SEC Staff

The Financial Accounting Resource Center™ is a comprehensive research service that provides the full text of standards, the latest news from the Accounting Policy & Practice Report ®,...

By Steve Burkholder

Dec. 5 — Public companies should look to use U.S. generally accepted accounting principles, rather than international standards, “for the foreseeable future,” the SEC’s top accountant said.

The Securities and Exchange Commission’s Wesley Bricker signaled Dec. 5 that the agency won’t be taking action any time soon on adoption—or even some form of optional use—of rules issued by the International Accounting Standards Board.

“On the question of possible further use of IFRS for domestic issuers, I believe that for at least the foreseeable future, the FASB’s independent standard-setting process and U.S. GAAP will continue to best serve the needs of investors and other users” of financial statements who rely on financial reporting by public companies, Bricker said at a major annual conference of the American Institute of CPAs.

IASB Shift Out of the Picture

As a result, the standards issued by the US. Financial Accounting Standards likely will be the accounting guidelines for SEC filings by U.S. domestic companies for many years to come.

Some six years ago, the SEC appeared ready to decide to mandate that U.S. public companies shift to international financial reporting standards, or IFRS, which the IASB issues.

However, long-term efforts by FASB and IASB to craft like-minded major rules for consistent global reporting hit roadblocks. The SEC went into a holding pattern on the international rules.

In sending a message on the continuing primacy of FASB rules in the U.S. capital markets, Bricker seemed to acknowledge what has been apparent in financial reporting circles for some two years.

IFRS Important to U.S. Investors

The SEC chief accountant also made the case for how important IFRS are in the U.S. capital markets.

Foreign companies that choose to list their securities in the U.S. are allowed to follow the international rules without reconciling accounts to U.S. GAAP. The SEC calls those companies “foreign private issuers.”

Today, U.S. investors hold direct stakes in securities of about 525 foreign private issuers with a market capitalization of about $7.3 trillion as of September, Bricker said in his Dec. 5 speech.

In addition, U.S. companies often look abroad for potential acquisition targets, he said. That adds up to U.S. businesses, especially those with a global reach, having “an ongoing interest in the quality of IFRS,” Bricker said.

Bricker to Boards: Cut Differences

Bricker used his bully pulpit to “strongly encourage” FASB and IASB to continue to work together to cut differences between their rules.

The two boards issued like-worded standards on revenue reporting in 2014. However, since then FASB and IASB have diverged on topics such as accounting for loan and other credit losses and on how to report on leases and lease expense in profit and loss.

To contact the reporter on this story: Steve Burkholder in Washington at sburkholder@bna.com

To contact the editor responsible for this story: S. Ali Sartipzadeh at asartipzadeh@bna.com

For More Information

Copyright © 2016 Tax Management Inc. All Rights Reserved.

Request Financial Accounting