The Securities and Exchange Commission held a roundtable discussion on the performance of International Financial Reporting Standards and U.S. generally accepted accounting principles during the subprime crisis.
The SEC's two newest members, Luis Aguilar and Troy Paredes, were in attendance after they were sworn in last week. They will be helping to set the roadmap for the convergence of IFRS with U.S. GAAP.
"What we hope to learn today is a bit more about the reasons why companies are using IFRS," said SEC Chairman Christopher Cox (pictured). "We cannot speak about financial reporting in 2008 without paying heed to current times. We all know what's going on in the capital markets."
Panelists talked about the varying treatment of off-balance-sheet items and the Financial Accounting Standards Board's recent decision to implement a one-year delay in moving special-purpose entities onto the balance sheet.
"On the one-year delay, we think that's a good balance," said Matthew Schroeder, managing director of accounting policy at Goldman Sachs. "We didn't see how the calendar could work. One year seems a reasonable basis for getting to the capital markets the information that's needed on these entities."
Discussing the problems of derecognition of financial assets in IFRS, Charlotte Jones of Deutsche Bank noted that the bank looked several years ago at all the special-purpose entities that it was involved with and whether they should be consolidated when moving from GAAP to IFRS.
"What we found at the point of conversion was the rules-based approach under U.S. GAAP did require revisiting and additional answers when we moved to IFRS," she said.
Ken Marshall, Americas leader for IFRS at Ernst & Young, talked about the differences between the rules-based approach in GAAP vs. the more principles-based IFRS. "I'm not advocating more rules for the sake of rules," he said. "We run a risk of a knee-jerk reaction to the crisis."
Now that it has more commissioners on board, the SEC is also expected to act soon on the final report issued last week by its Advisory Committee on Improvements to Financial Reporting.
"I believe that the recommendations in the report will make a difference in improving financial reporting, reducing complexity, and making information more consistent and useful for investors," said Grant Thornton CEO Ed Nusbaum in an interview with WebCPA.
He singled out the recommendations for adding key performance indicators to disclosures as one that would benefit investors in their decision-making process. "The SEC can and should move quickly," said Nusbaum. "They have some actionable recommendations. Now that we have more commissioners and a strong staff on board, I would hope that the SEC would implement them."
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