A SEC staff report is likely to recommend that the United States adopt International Financial Reporting Standards (IFRS), says Paul Mackey, CCH Manager, SEC Content for Accounting Research Manager®.
“A speech given by SEC Commissioner [Elisse B.] Walter was just posted online indicating it should happen around mid to late June,” Mackey says. “Then it’s a question of how quickly the commission acts on it. How they’ll vote is anybody’s guess, but the feeling is that they’re going to support adoption with a long transition or phase-in period, as much as five to 10 years.”
If adopted, IFRS will make it easier to compare the financial statements of U.S.-based companies to those of companies based elsewhere. It will also simplify record-keeping for multinational organizations. However, the transition will involve significant cost and disruption as organizations research and implement the change.
Mackey advises corporations to start examining their reporting and internal systems today to determine where they might need to make adjustments.
“Companies that are already doing some kind of international accounting will have an easier time of it, but for corporate systems and technology that doesn’t recognize all the international standards and methodologies, an adoption of IFRS could be problematic,” Mackey says.
The prospective change should not come as an enormous surprise, Mackey adds. The SEC has already spent a decade exploring ways to bring U.S. accounting standards into greater alignment with the standards set by the International Accounting Standards Board, which are in use in more than 100 countries, including most of Europe. Additionally, finance ministers from the G-20 major economies have been urging a deadline of 2013 for broader IFRS adoption.