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SEC's IFRS report could jeopardize US involvement in IASB

European financial policymakers have begun to question whether the United Stat

Following the release of a report from staff members at the Securities and Exchange Commission that all but eliminated any chance that the United States would adopt International Financial Reporting Standards in the near future, European financial policymakers have begun to question whether the country should give up its seat on the International Accounting Standards Board, Reuters reported.

"The lack of a clear vision from the U.S. creates uncertainty and hampers the IFRS from becoming a truly global accounting language," Reuters quoted European Commission spokesman Stefaan De Rynck as saying. "It is also becoming more difficult to justify the representation of jurisdictions not applying IFRS in the IASB governance framework."

On July 13, the SEC staff issued a scathing report outlining a number of concerns regarding possible adoption of the rules in the United States. The 127-page report highlighted gaps in the system's comprehensibility, as well as potentially shoddy communication between agencies in various countries. In its report, Reuters pointed out that the United States in not the only major economic player to drag its heels on IFRS; China and Japan have also not yet adopted the reporting standards.

Comments

Topic Expert
Sunil Thukral
Title: Controller/Technical Accounting Advisory..
Company: Consultant
(Controller/Technical Accounting Advisory/ SEC Reporting, Consultant) |

Don't just disregard IFRS as of yet as it is gradually making its space within U.S. GAAP

I personally have received a similar feedback from many of senior professionals here in the U.S. Some of the responses relating to IFRS convergence I have received are - "Not in my lifetime."......."Maybe convergence will be achieved in about 20 odd years"....."Maybe never."

Somehow a couple of years back everyone was talking about IFRS coming over to the U.S., however, somewhere in the middle everyone lost interest in IFRS. Maybe it was the economic crisis. So most of the companies have moved from following a proactive approach for the adoption of the IFRS - to a "wait and see approach". So all the eyes are on the SEC for now as what final decision they take on the timing.

On the other hand companies will see portion of of IFRS entering into U.S. GAAP. For example the Business Combination accounting standards are converged between IFRS and U.S. GAAP, i.e. essentially you can follow either of the accounting standards and you will come to the same conclusion.

In addition, some of the important accounting standards are on the verge of being converged:

1) Revenue Recognition that has an effective date of around 2015.
2) Leasing accounting standard - The final exposure draft is expected in Q4-2012, which will not have any effective date in it.

Hence, if you look at the Business Combinations and some other converged accounting standard, some progress has certainly being made on IFRS / U.S. GAAP convergence front. But will have to wait and see......so I will say that don't just disregard IFRS as of yet as it is gradually making its space within U.S. GAAP.

Please feel free to share your thoughts as this convergence issue will impact all the companies / capital markets and the way we do business. Please also feel free to contact me directly at "Sunil.CPA [dot] CFAatgmail [dot] com".

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