The Securities and Exchange Commission has received letters from accounting organizations and firms responding to its concept release on allowing public companies to prepare financial statements in accordance with International Financial Reporting Standards, some in favor and some opposed
The SEC had requested comments on the plan to allow U.S. public companies to use IFRS instead of U.S. generally accepted accounting principles, and the letters poured in.
The Center for Audit Quality said it supported use of IFRS by all U.S. domestic registrants. "The center believes that the auditing profession in the United States is ready to support the use of IFRS by all U.S. domestic registrants, including an optional period, through appropriate training of professionals, encouraging the exercise of well-reasoned professional judgments under IFRS, supporting investor and issuer education efforts, and supporting the academic community in the education of teachers and students," said a letter from CAQ executive director Cindy Fornelli.
The CAQ recommended that the SEC develop a comprehensive plan, with appropriate timetables, for moving all U.S. domestic registrants to IFRS.
Ernst & Young chimed in with support for the proposal as well. "We commend the commission on this initiative," said a letter from the firm. "To signify its strong commitment to IFRS as the single set of global accounting standards and to provide impetus to accelerate needed changes, we propose that the commission make a clear statement that it will require all U.S. issuers to adopt IFRS as of a date certain."
Chester Abell, a partner with Ernst & Young's tax accounting and risk advisory services, pointed out that the SEC has suggested that companies may be able to make an election to move to IFRS in 2009, but he believes it will take several years for companies and accounting educators to make the adjustment. "Probably five to seven years after that would seem to make sense," he said.
The New York State Society of CPAs said in its letter that it supports convergence between IFRS and GAAP, but expressed reservations about the SEC proposal.
"We call your attention to the EU proposal which delays until 2011 the requirement for companies listed in Europe that are from countries such as the United States, Japan, Canada and China to prepare their financial statements in accordance with IFRS," wrote the NYSSCPA. "It is widely acknowledged that this proposal will slow down the convergence process. ... The adoption of the SEC's proposal to allow U.S. companies to prepare financial statements in accordance with IFRS would further impede convergence. As a result, we believe that the SEC's proposal to allow U.S. companies to prepare financial statements in accordance with IFRS is premature." The NYSSCPA said that in a few years, the prospects for further convergence will be more apparent.
A joint letter from Robert E. Denham, chairman of the Financial Accounting Foundation, and Robert H. Herz, chairman of the Financial Accounting Standards Board, also argued for convergence. "Investors would be better served if all U.S. public companies used accounting standards promulgated by a single global standrard setter as the basis for preparing their financial reports," they wrote. "This would be best accomplished by moving U.S. public companies to an improved version of International Financial Reporting Standards." They argued that permitting choice between IFRS and GAAP would create unnecessary complexity for investors.
Register or login for access to this item and much more
All Accounting Today content is archived after seven days.
Community members receive:
- All recent and archived articles
- Conference offers and updates
- A full menu of enewsletter options
- Web seminars, white papers, ebooks
Already have an account? Log In
Don't have an account? Register for Free Unlimited Access