Tuesday, August 5, 2008

IFRS Roundtable at SEC

Yesterday, the SEC hosted its fourth Roundtable on IFRS. The SEC was especially interested in participants views on the robustness of IFRS during the turmoil of the last few years.

A majority of the participants were of the view that IFRSs have stacked up very well against US GAAP. As well, the IASB is seen as being responsive to issues surrounding the credit crisis. The initiatives it has in process are discussed on their website at http://www.iasb.org/About+Us/About+the+IASB/Response+to+the+credit+crisis.htm

Concerns were expressed about the lack of maturity of IFRSs as a body of Standards. There were also concerns about the absence of specific rules in IFRS when compared with US GAAP.

On the one hand the lack of maturity of IFRS versus US GAAP can be viewed as a disadvantage since there has been fewer years to experience to settle their application. On the other hand, being relatively new on the scene can be an advantage. The IASB can and has learned from the experiences in jurisdictions such as the US. There is less likelihood as well of inconsistencies arising among or between individual standards that have been built up over several years. Apparent inconsistencies sometimes have had to be resolved under US GAAP.

There will need to be an adjustment by US financial statement preparers and users when converting to IFRS owing to a lack of detailed rules in those standards. The subjective reasoning required in IFRS will need to be structured and put into a system of operational control. This can of course have a positive impact as companies re-evaluate their accounting treatments and the “substance” of transactions.

The “bottom line” is that the participants agreed that.

1. There should be a single set of global accounting standards.

2. Whereas US GAAP has the rigor to meet the challenge of being a single standard, there is a continuing momentum to adoption of IFRS worldwide as the global set of standards for financial reporting.

3. The transition to IFRS in the US will be challenging but the business community is asking for a date certain and a detailed roadmap for adoption of IFRS by US companies. (Many of the issues raised by Roundtable participants and others will be resolved through the FASB/IASB convergence projects.)

There was no indication (or even a good clue) at the Roundtable about the possible announcement of a date certain for IFRS conversion and or a detailed plan. Chairman Cox noted that about 100 foreign issuers are filing IFRS financial statements without a reconciliation under the policy change announced last year.

The SEC has been very active on the subject of IFRS . The discussions and initiatives are set out on the SEC website at http://www.sec.gov/spotlight/ifrsroadmap.htm (Spotlight on International Financial Reporting Standards “Roadmap”).

There were a number of excellent points made on specific issues and I may come back to the specific points in future discussions in this blog. (I took a lot of notes).

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