SEC statement provides plan for 2011 decision on IFRS implementation in the U.S.

• Author: Patrisso, Janice
• Position: Financial reporting - Securities and Exchange Commission - International Financial Reporting Standards

A February statement from the U.S. Securities and Exchange Commission signaled that it is continuing to evaluate whether, when and--if so--how International Financial Reporting Standards might be incorporated into the financial reporting system for United States' issuers. Currently, more than 100 other countries around the world require or permit the use of IFRS for listed companies or have national standards largely based on IFRS.

While the SEC and the Obama Administration have supported the goal of a single set of high-quality globally accepted accounting standards, the established "work plan" to reach a decision will take a deliberative path.

The SEC says it plans to decide in 2011 whether to allow or require a switch from U.S. generally accepted accounting principles to IFRS for some U.S. issuers, with the first required use of a global standard not being before reporting years 2015 or 2016. The SEC also indicated that IFRS is best positioned to become the global set of standards.

Considering IFRS

Two days following the SEC's Feb. 24 statement on IFRS, 49 percent of respondents to a KPMG IFRS Institute webcast poll indicated that if the SEC makes a decision to require the use of IFRS, they would like to have the option to adopt the new standards earlier than the potential mandatory compliance date in 2015 or 2016.

With the SEC's statement reaffirming support for a global reporting framework, the possibility of early adoption once there is a definitive SEC decision on the use of IFRS by U.S. issuers is one of several ongoing initiatives that could impact executives' considerations for a possible U.S. move toward IFRS. In advance of any SEC decision on the incorporation of IFRS into the financial reporting system for U.S. issuers, corporate executives should take the following steps:

* Monitor the standard-setting process as the International Accounting Standards Board and Financial Accounting Standards Board work to converge many areas of financial reporting under IFRS and U.S. GAAP. The boards have developed an aggressive and extensive agenda of joint projects targeted for completion by June 2011, and the SEC has indicated that successful completion of these projects is a necessary step in the process before it will consider whether to permit or require the use of IFRS by U.S. issuers. Completion of these projects has the potential to significantly affect U.S. GAAP and, therefore, U.S. issuers regardless of an SEC decision on IFRS.

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