The Securities and Exchange Commission’s final staff report on International Financial Reporting Standards seemed to bend over backwards to avoid making a recommendation to the SEC commissioners on how they should vote, but with all the many drawbacks listed in the report, it’s questionable how the SEC could ever vote at this point to support IFRS.

The report, issued on the last day of SEC chief accountant James Kroeker’s term, was the result of the hard work he and his successor, Paul Beswick, along with their staff, put into the complex work plan they were tasked with carrying out by the SEC commissioners. While the report is at pains to come across as even-handed, often citing the benefits of “a single set of high-quality globally accepted accounting standards,” which has become a cliché after all these years, it frequently contrasts those benefits with all the reasons why IFRS is not up to the task.

Whether it’s the old argument about how IFRS lacks the LIFO method of inventory accounting, or the absence of industry-specific guidance in IFRS, or the problems with funding of the IFRS Foundation, which oversees the International Accounting Standards Board, the report describes in what must be painful detail for the IASB board members why IFRS is just not ready for prime time.

For example, at one point the report talks about the feedback the SEC staff received from public companies on the implications of moving directly to IFRS. "The majority of the issuers expressed concern that moving directly to IFRS had the potential to result in significant expense to the company and confusion for investors," said the report. "Many of the issuers indicated that the costs of full IFRS adoption easily could be among the most significant costs ever required from an accounting perspective and questioned whether the corresponding direct benefits would justify such a full-scale transition. Issuers frequently cited the level of effort of moving directly to IFRS, including reconsidering and updating existing accounting policies and procedures, investing in updates to or new information systems, redesigning internal controls, educating existing accounting staff, and educating investors about the changes to their accounting policies."

Official reactions to the report from the IASB and the IFRS Foundation, as well as other accounting organizations, have been relatively muted so far (see SEC Releases Staff Report on IFRS Work Plan and IASB Urges SEC to Come on Board with IFRS). Perhaps there is still hope that the SEC will eventually come around to the IASB’s way of thinking, if not under Mary Schapiro’s chairmanship, then under her successor’s. That may happen eventually, but certainly not at the present time.

What seems clear is that the SEC wants to retain control of accounting standards for U.S. public companies and is loath to give those up to an international organization, no matter how well intentioned. It’s likely the U.S. will lose some seats on the IASB board once the SEC position on IFRS sinks in, but the U.S. will still play some role while the IASB and the Financial Accounting Standards Board continue the slow process of harmonizing the standards for revenue recognition, financial instruments, leasing and insurance contracts. After those projects are finalized, the future path for U.S. GAAP and IFRS looks hazy.

Both IASB chair Hans Hoogervorst and FASB chair Leslie Seidman have recently spoken about how the convergence process needs to change. With the two boards growing weary of the 10-year effort at convergence, and the SEC doggedly withholding its approval of IFRS, the question of how and when the U.S. will ever accommodate international standards remains unanswered, just as it was a decade ago.

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