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ICAEW is challenging proposals from the Securities and Exchange Commission (SEC) to adopt a staged approach to incorporating International Financial Reporting Standards (IFRS) into US GAAP, and is calling instead for a simultaneous transition.
The institute describes the SEC’s plans, outlined in a paper called Exploring a Possible Method of Incorporation as ‘fraught with risks and drawbacks’. They include the use of a combination of convergence and endorsement, which is labelled ‘condorsement’ and is likely to take several years to complete.
Dr. Nigel Sleigh-Johnson, head of ICAEW’s Financial Reporting Faculty, said: ‘Having seen how IFRS adoption worked for listed companies in the UK and the rest of Europe, it seems clear that the best strategy to minimise market disruption is a simultaneous transition on a mandatory, well-publicised and certain date, at least for major companies.’
Sleigh-Johnson warned that a gradual transition risks producing ‘a rather incoherent and complex accounting framework’. He also suggested that the SEC’s time estimates for its proposed transition of five to seven years are unrealistic, given the complexity of the process and the fact that IFRS will continue to evolve over that time.
However, Sleigh-Johnson welcomed the fact that the future role of the Financial Accounting Standards Board had been clarified, saying: ‘The FASB will still have a valuable role to play. The IFRS model works best when it is underpinned by strong national standards setters in each jurisdiction, which can contribute to and influence the work of the IASB. The UK Accounting Standards Board is a shining example.’
Source: Journal of Accountancy
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