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SEC Makes IFRS a Higher Priority As G-20 Summit Calls for Strengthened Global Financial Regulation
During the recent G-20 Summit in Pittsburgh, finance ministers and central bank governors from important industrial and emerging-market countries debated how best to pursue a sound and sustainable recovery from the global economic and financial crisis. This sweeping objective includes what President Obama called “repair of financial systems and [the need to] maintain the global flow of capital” and “to reform the global architecture to meet the needs of the 21st century.” As a further measure of the G-20’s commitment to change, it agreed to be the premier forum for international economic cooperation and established the Financial Stability Board (FSB) to include major emerging economies and coordinate and monitor progress in strengthening financial regulation. Among the top issues facing the G-20 has been standardization of cross-border economic policy such as the accounting principles followed in each country. At the Summit, G-20 leaders encouraged the International Accounting Standards Board (IASB) and other international accounting bodies to “redouble their efforts to achieve a single set of high quality, global accounting standards within the context of their independent standard setting process and complete their convergence project by June 2011.” Implicit in this G-20 directive is the transition from U.S. generally accepted accounting principles (GAAP) to international financial reporting standards (IFRS), which more than 100 industrialized countries already have adopted, but not the U.S.. In the past 12 months, the U.S. Securities and Exchange Commission (SEC) has appeared to lower its priority on adoption of a unified set of international accounting standards due to the more pressing need to stem the fallout from the global financial crisis and the change in leadership following the 2008 presidential election. The SEC has had its hands full and undergone extreme levels of scrutiny over regulating U.S. financial markets, executive pay disclosures as well as the multi-billion dollar Madoff investor fraud. New SEC Chair Mary Shapiro and SEC Chief Accountant James Kroeker extended by two months the comment period on the SEC’s previously issued IFRS Roadmap, mandating that U.S. companies adopt IFRS by 2011. Perhaps now signaling a more aggressive posture by the SEC, Kroeker recently has encouraged observers not to read too deeply into this deferral period. At a meeting sponsored by the New York State Society of Certified Public Accountants, held the week before the G-20 Summit, he pointed to signs that the recent economic crisis has helped, not hinder, initiatives to push forward the IFRS Roadmap, saying: “As we’ve seen the events of the economic crisis unfold, these events are not national events. These impacts are not national impacts.” He added that there is a direct initiative in the near-term to address U.S. adoption, and that "It is important for us to turn our attention back to [the roadmap].” Kroeker also said that:
Kroeker’s comments may reflect a synopsis of input received during the SEC comment period for the IFRS Roadmap. Much of the feedback came from Fortune 500 corporations and highlighted the need for convergence, though the majority remained uncertain as to one set agreeable timeframe for this to happen. Issues such as joint projects by the IASB and FASB on accounting issues with leases, revenue recognition, pensions as well as the hotly contested fair value accounting considerations may need to be resolved before true adoption of IFRS is achieved by U.S. companies. For Further Reading:
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