Last week the Securities and Exchange Commission (SEC) released its 65-page analysis of IFRS in action, Work Plan for the Consideration of Incorporating International Financial Reporting Standards [IFRS] into the Financial Reporting System for U.S. Issuers. Intended to assist the staff of the Office of the Chief Accountant of the SEC to consider “whether, when, and how the current financial reporting system for U.S. issuers should be transitioned to a system incorporating . . . IFRS,” the new work plan analyzed the most recent annual consolidated financial statements from 183 companies that purported to comply with the international standards.
“First, across topical areas, the transparency and clarity of the financial statements could be enhanced,” the executive summary says. For example, some companies failed to provide accounting policy disclosures in certain relevant areas, while others provided insufficient disclosures or inconstant terms. “Second, diversity in the application of IFRS presented challenges to the comparability of financial statements across countries and industries,” the summary says. Diversity sometimes arose from the standards themselves; in other cases, diversity resulted from an apparent non-compliance with IFRS.
In a second just-released report, A Comparison of U.S. GAAP and IFRS, the SEC staff focuses on six particular areas, including an assessment of “whether there is sufficient development and application of IFRS for the U.S. domestic reporting system.”
FAF doesn’t fully endorse ‘condorsement.’ In related news, the board of trustees of the Financial Accounting Foundation (FAF), FASB’s parent company, just published its letter to the SEC outlining its preferred path for IFRS incorporation. “The Trustees support the incorporation of IFRS into U.S. GAAP as the appropriate path forward for the continued development of high-quality, investor-focused, international financial reporting standards,” the letter says. At the same time, the trustees recommended several modifications to the SEC staff’s current “condorsement” approach to IFRS incorporation, based on the assumption “that, over time, international standards will become the foundation of U.S. GAAP.”
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