For months, leaders in the accounting profession have been demanding that the Securities and Exchange Commission give them a "date certain" for the transition to International Financial Reporting Standards, and now they have it, though the date looks more than a little uncertain.
While the proposed roadmap announced last week by the SEC provides more concrete details than we've gotten previously, this roadmap looks a whole lot more like an obstacle course.
For one thing, there are all the so-called "milestones" that need to be reached before the roadmap actually gets finalized. Those include everything from making the funding mechanism for the International Accounting Standards Board less dependent on the whims of its constituents to ensuring that accounting students and accountants themselves are actually receiving the education they will need about the new standards.
The effective date for the IFRS transition is supposed to be 2014, but the road is actually muddier than that because many large public companies can actually make the switch earlier (see SEC Proposes IFRS Roadmap). Specifically, companies that are the top 20 in their industry according to market capitalization will be able to begin filing statements in IFRS in 2010.
In addition, the SEC is considering a staggered approach that would first mandate IFRS for large "accelerated filers" by 2014. Smaller "accelerated" and "non-accelerated" companies would be able to hit the brakes until 2015 or 2016. If the Sarbanes-Oxley rules for non-accelerated filers who are subject to all the Section 404 requirements is any guide, we could see that date postponed even further if the IFRS transition turns out to be especially onerous.
In fact, while IFRS seems all but inevitable in the U.S., as more than 100 other countries already have either moved to IFRS or announced plans to do so, the SEC is still leaving some wiggle room. In 2011, it will hold a meeting to assess how well IFRS, the IASB, FASB, academia and corporate America are adjusting. And if they aren't, then the commissioners could decide to put the kibosh on the transition, or more likely allow companies to delay their own transitions without incurring stiff penalties.
Leaving room for an extended transition probably isn't a bad idea because the adjustment isn't going to be easy or cheap for a lot of companies to make.
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