IFRS Not Required Until 2015 or Later
SEC announces new timeline for public companies
Akron, Ohio (Feb. 25, 2010) - On Wednesday, Feb. 24, the SEC unanimously approved a new timeline that envisions 2015 as the earliest possible deadline for the required use of International Financial Reporting Standards (IFRS) by U.S. public companies. With this new timeline, the SEC clearly stipulated that the move toward IFRS adoption should continue, but now there is a one-year delay from the initial plan that had previously targeted 2014 as the year of implementation (or longer, as the deadline could be pushed back even further).
The SEC stressed that they still plan to make a recommendation in 2011 for public companies to start using IFRS. They expect that by that time, there will be significant progress made by the Financial Accounting Standards Board (FASB) and the International Accounting Standard Board (IASB) in converging U.S. and international accounting standards. Additionally, the SEC staff has been directed to develop a work plan that focuses on the following issues:
- Determining whether IFRS guidance is sufficiently developed and consistent in application for use as the single-source of accounting standards for U.S. financial reporting purposes;
- Ensuring that accounting standards are set by an independent standards-setter (i.e., one that will not “bend” to political pressures);
- Investor understanding and education related to IFRS guidance and how that guidance differs from U.S. GAAP guidance;
- Understanding whether U.S. laws or regulations, other than securities laws and regulatory reporting, would be affected by changing the accounting standards;
- Understanding the impact on both large and small reporting entities (including, but not limited to, financial reporting implications, costs associated with conversion, implications to users of financial statements (public investors, creditors, etc...));
- Determining whether those who prepare and/or audit financial statements are sufficiently prepared to make the conversion to IFRS.
The SEC plans to allow time for orderly and high quality changes that result from conversion to IFRS; based upon this new information, that conversion period is now indicated to begin no earlier than 2015. However, when IFRS is adopted, it will require comparative financial statement presentation so the “effective date” of conversion could technically require data conversion earlier than 2015 in order to be ready.
Further, this announcement by the SEC does not give any indication as to when, or if, these developments might impact privately held companies, and the FASB, along with the newly formed Blue-Ribbon Panel on Private Company Financial Reporting will be addressing those implications. IASB has previously issued IFRS for Small and Medium Sized Entities, which is a much simpler version of IFRS, and these standards will certainly be part of the consideration for private companies on a going forward basis.
An article written by the AICPA is linked here http://www.journalofaccountancy.com/Web/20102656.htm that also provides good information about the new timeline announced by the SEC. Bober Markey Fedorovich will continue to advise you of these developments as more information becomes available. If you have any specific questions, please feel free to contact BMF partner Jim Merklin at 330.762.9785 or by email.