FASB chairman advocates 'improving and adopting' IFRS For U.S. companies.

Author:Heffes, Ellen M.
Position:Financial reporting - Financial Accounting Standards Board - Interview
 
FREE EXCERPT

In an interview with Financial Executive Editor-in-Chief Ellen M. Heffes, Financial Accounting Standards Board Chairman Robert H. Herz says the timing for the United States to make a move toward adopting International Financial Reporting Standards "is in the SEC's court." In the following interview, conducted in July, Herz speaks candidly on this and what financial executives should be doing to prepare for "the movement" toward a single set of high-quality financial reporting standards.

[ILLUSTRATION OMITTED]

From your viewpoint, where in the process is the convergence of U.S. generally accepted accounting principles with International Financial Reporting Standards?

Herz: We continue to work towards the goal and vision of a single set of high-quality international standards. That's what was embodied in the 2002 Norwalk Agreement, and described in more detail in our 2006 Memorandum of Understanding (MOU) with the IASB [International Accounting Standards Board].

We're in the process of updating that MOU to show for each of the joint projects that we're working on the next steps and estimated completion dates, which run towards 2011 or so. Both boards will publish the updated MOU--it's currently being reviewed by the staff of the U.S. Securities and Exchange Commission and European Commission for their input. (Editor's note: The MOU was not published by press time, but is expected to be released by September.)

Then, where we go in the United States, for public companies, is in the SEC's court. The SEC has indicated that it intends to propose another "roadmap," which might have an option for all or certain U.S. registrants to choose IFRS. This roadmap may also have a date or dates in the future for which there would be a conversion to what we call [an] "improved set of IFRS" to allow us time to complete the major joint projects we've been working on. If we're successful with those, we will have significantly changed not only U.S. GAAP but also IFRS.

We advocate that the U.S. should be helping to "improve" IFRS and then adopt--getting it to a state where we think it's as good as or better than existing U.S. GAAP, and then adopting it.

You're calling it "the improved IFRS?"

Herz: We think it's appropriate to call this approach to convergence "improve and adopt" IFRS in this country. We held a well-attended public roundtable in New York on June 16 to talk about the broader issues in our reporting system that come with the movement and issues that would affect not just SEC registrants but bank regulators, taxing authorities, lenders, the educational system, the CPA examination system, private companies, not-for-profits, etc.

We may put together a proposal on how our system might deal with these many issues. We had put forward the idea that there needs to be a national blueprint to get the country to these improved IFRS that identifies the detailed issues that would need to be addressed--and who would address them, how and when.

I also believe we'd need a kind of national steering group to catalogue and address these issues so that they're handled in a thoughtful, orderly way that doesn't create confusion and chaos.

Besides accounting rules, there are other changes. Are those unintended consequences or are they expected?

Herz: Our response letter to the SEC's concept release last year listed many potential issues, and I've been discussing...

To continue reading

FREE SIGN UP