SEC Pushes Support for IFRS; New Health Care Law

Hits Corporate Earnings; PCAOB Proposes

Audit Standard on Communications

SEC Pushes IFRS with Proposed Work Plan - On Feb. 24, 2010, the Securities and Exchange Commission (SEC) issued a public statement addressing its work plan going forward related to the convergence of International Financial Reporting Standards (IFRS) with generally accepted accounting principles (GAAP).

At the meeting, Chairman Mary Schapiro stated: “US GAAP should be improved by this process, as well as IFRS.”  

The SEC continues to delay its timetable for U.S. public companies to present their financial information according to IFRS.  The commission elected to defer the earliest reporting date for largest reporting entities until Dec. 31, 2015.  A vote on this proposed reporting date will occur in 2011.  There will be no early adoption to IFRS, and consideration has been given as to allow companies to have the option of reporting under U.S. GAAP or IFRS.  

Before the important vote in 2011, the SEC ’s staff will investigate aspects of issues identified by comment letters received on the roadmap. The staff will provide progress reports leading up to the vote in 2011, as well as the status of the convergence projects being undertaken by the International Accounting Standards Board and Financial Accounting Standards Board.  Companies likely would need a four to five year period to fully implement new reporting standards.

AT&T Takes $1 Billion Earnings Hit Following Passage of New Health Care Law - In response to the new health care bill signed into law by President Obama, companies such as AT&T have recognized significant charges to net income related to differences between tax and U.S. GAAP accounting.  

AT&T took a $1 billion charge due to changes in the deductibility of prescription drug benefits for retirees in its first quarter 2010 filing.  Previously, companies such as AT&T were allowed to deduct federal subsidies which they previously received. Going forward, these subsidies will not be deductible. 

Proposed PCAOB Rules Address Audit Standard on Communications with Audit Committees - In a meeting held March 29, 2010, the Public Company Accounting Oversight Board (PCAOB) proposed an auditing standard on Communications with Audit Committees, requesting comment.  The PCAOB's Standing Advisory Group (SAG) has discussed enhancing the communications required by auditors with audit committees. 

The group looks to specifically address the communications involving areas of critical accounting estimates.   The auditor would be required to assess the effectiveness of the two-way communication experienced with the audit committee upon the completion of the audit engagement.