The SEC has published its initial progress report on the work plan for the proposed move to International Financial Reporting Standards, but the report raises many questions without necessarily answering them just yet.
Among the issues that continue to dog the convergence process is the question of how much it will cost for firms to make the switch.
Regardless of the mechanism for incorporation of IFRS, members of several regulatory agencies have informed the Staff that any potential incorporation of IFRS will entail significant effort by the agencies, said the report. This effort will be necessary because the regulators would need to invest a potentially significant amount of human capital to evaluate and modify the financial metrics currently derived from U.S. GAAP financial reports, as the accounting results under IFRS may materially differ from those under current U.S. GAAP.
Tom Jones, director of Pace Universitys Center for the Study of International Accounting Standards, and a former vice chairman of the International Accounting Standards Board, stopped by the Accounting Today and WebCPA offices here on Thursday and talked about how he thinks those costs have been wildly exaggerated.
He recently debated former SEC Chief Accountant Lynn Turner at a conference in Las Vegas about these concerns.
I think Lynn was quoted as saying this is going to be equivalent to Sarbanes-Oxley, but thats clearly way off the mark, said Jones. When you see the list of standards which will be identical almost word for word, you know very well there cant be a huge transition cost.
At a New York State Society of CPAs Foundation for Accounting Education conference on IFRS that also took place on Thursday, Ian Ball, the chairman of the International Federation of Accountants, said he is concerned about the costs, however.
Its not easy to move from a national set of standards to an international set of standards, he said. There are a lot of costs. One cost is the education costs. We shouldnt fool ourselves that theres not a cost.
However, Ball still believes in convergence, including for the International Public Sector Accounting Standards in which his organization is involved. What convergence will do is allow us to have a more common regulatory approach and more level playing grounds, he said.
The SEC staff plans to find out more about how other countries have handled the education piece of the puzzle.
Through outreach to foreign regulators, the Staff will attempt to identify the mechanisms foreign regulators have used to facilitate constituent education on IFRS in their respective jurisdictions, said the progress report.
The work plan should be an education in itself for the SEC staff.