The Securities and Exchange Commission’s recent staff report on International Financial Reporting Standards indicates that IFRS is not going to be arriving in the U.S. anytime soon.
Peter Bible, partner-in-charge of the public companies group of accounting firm EisnerAmper, does not believe IFRS is in the foreseeable future in the U.S. “There are things they wanted to see out of the International Accounting Standards Board as far as independence and funding, as well as consistency of adoption in the various countries that have adopted it, and the fact that she [Mary Schapiro] said there’s no timeline for incorporation into U.S. GAAP leaves you with, well, there’s much ado about nothing,” he said.
IFRS may be a possibility again, depending on who takes over from Schapiro once her term ends. Bible pointed out that former SEC chairman Christopher Cox made it a goal for the commission to achieve convergence between U.S. GAAP and IFRS, creating a proposed roadmap back in 2008 for convergence by 2015.
“Unfortunately a lot of things happen on the way to where you want to get to,” said Bible. “You had Dodd-Frank, which required a significant amount of rulemaking. A lot of it is still not done, and that fell on the [SEC] staff. I think it’s probably out there someplace in the future. When, I don’t know. Everybody would recognize that a global set of accounting standards globally applied is the right answer and an admirable goal, but I just think that several things will have to happen. I’ve always been a big proponent, but until there’s consistency across the regulatory bodies that regulate the various exchanges and securities markets, you’re not going to get truly global adoption.”
Meanwhile, the IASB and the Financial Accounting Standards Board remain at odds over issues such as how to measure gains and losses on derivatives, as well as how to account for loan losses and income taxes. “The U.S. income tax rules are unique,” Bible pointed out. “To get globalization on accounting for income taxes is going to be difficult at best because the various tax laws and jurisdictions all give rise to different economic outcomes.”
One of the biggest issues, he noted, is deferred taxes on unrepatriated foreign earnings, which are a unique feature of U.S. tax law.
Meanwhile he is telling clients to take a wait and see attitude. “You can only do what you know about,” said Bible. “That’s what we tell people. IFRS is in U.S. GAAP right now through some of the converged projects like business combinations. The revenue recognition project and the leasing project, which are on the horizon, are both converged standards. It’s starting to filter into U.S. GAAP, but as far as a line in the sand, where effective 2015 you shall adopt it, I just don’t think you’re going to have to worry about it, what with all that these companies have to deal with, both economically and financially.”