Preparing for significant, multi-year changes.

• Author: Torr, Sean
• Position: FINANCIAL REPORTING

International Financial Reporting Standards are currently permitted or required in approximately 120 nations and reporting jurisdictions across the globe, according to the American Institute of Certified Public Accountants IFRS Resources (as of September). As such, IFRS has become a common language of accounting in the international business community.

In February 2010, the U.S. Securities and Exchange Commission issued a statement expressing the SEC's "strong commitment to a single set of global standards" and "the recognition that IFRS is best-positioned to be able to serve the role as that set of standards for the U.S. market."

In May 2011, the SEC issued a staff paper that outlined a possible method of incorporating IFRS into the U.S. financial reporting system and requested comments on the proposed framework. The proposed framework combines elements of convergence and endorsement and was characterized by the SEC as a "phased transition" approach.

Proposed Framework, Comments and Considerations

Under this framework, the Financial Accounting Standards Board and the International Accounting Standards Board will continue their current agenda to converge U.S. generally accepted accounting principles and IFRS. Upon completion of the current convergence agenda, FASB would continue to be involved in the process for developing IFRS and would "incorporate newly issued or amended IFRS into U.S. GAAP pursuant to an established endorsement protocol." This "would be accomplished over a period of several (e.g., five to seven) years."

FASB would "retain the authority to modify or add to the requirements of the IFRS incorporated into U.S. GAAP" when in the public interest and necessary for protection of investors. It was also noted in the staff paper that modifications to IFRS during their incorporation process into U.S. GAAP should be "rare and avoidable" and that the issuance by FASB of requirements that conflict with IFRS should onlv occur "in unusual circumstances."

The goal of incorporating IFRS into the U.S. financial reporting system "would be full alignment of U.S. GAAP and IFRS."

The SEC is currently analyzing comment letters received i in response to the proposed framework outlined in the staff i paper. In a keynote speech in June for the Society of Corporate Secretaries and Governance Professionals 65th Annual Conference, former SEC Commissioner Kathleen L. Casey I indicated that "The commission is slated to make a decision on these...