Reading the subtle – and not so subtle – communications from the SEC make it nearly impossible to anticipate the direction the “new” SEC is going to travel with IFRS.
Under former SEC Chair Christopher Cox, the SEC moved toward a new frontier. The commission implemented IDEA – the replacement to the EDGAR database, passed XBRL for financial statements and mutual funds and proposed a landmark roadmap to transition the U.S. to the International Financial Reporting Standards (more commonly referred to as IFRS).
While most decision-makers believed the move to IFRS was inevitable, a loud majority still voiced their opposition saying the roadmap timeline was too aggressive. As Cox finished his term as SEC chairman, the SEC rushed to get the roadmap out for comment.
Then the recession took center stage. The Stimulus Act was passed in October 2008 to help the unstable economy. Job losses were mounting. Fingers began pointing to fair value and financial institutions were demanding the SEC suspend fair value. Congress mandated that the SEC undertake a study of fair value accounting. Understandably, the roadmap was delayed.
Things then went from bad to worse. The alleged Bernie Madoff $50 billion Ponzi scheme broke. And fingers again pointed to the SEC. Investigators failed to investigate many repeated allegations against Madoff over 15+ years.
Nonetheless, even though mired in the recession and the Madoff scandal, the SEC released its proposed roadmap for IFRS. While the roadmap was significantly delayed, there was only one major change made in the timeline.
Then newly elected President Barack Obama nominated Mary Schapiro as the new chair of the SEC. A former SEC commissioner, Schapiro said from the very beginning, “I will not be bound by the existing roadmap that’s out for public comment.” And she has not. Schapiro has come in and is reinvigorating the SEC as the securities watchdog for the nation – and promises not to take it easy on corporate fraudsters.
Already Schapiro has:
- Said non-accelerated filers need to become fully compliant with Sarbanes-Oxley (particularly with Section 404 (b))
- Ended the penalty pilot program, which required SEC staff to obtain special approval for involving civil monetary penalties for public companies as punishment for securities fraud
- Implemented a more rapid approval process for formal orders of investigation
Her actions and her words have made many wonder about the roadmap and the outlook for IFRS. Will the nation actually transition to IFRS or is it just being delayed? How long will the delay be? Six months? Six years? Given the current economy and the many calls from lawmakers to reform the nation’s financial regulatory system, including the SEC, this may not be the ideal time to be completing a transition such as this – one that will dramatically change financial reporting, the accounting profession and possibly litigation.
Right when many were ready to put on the brakes completely, Schapiro met with Sir David Tweedie, chair of the International Accounting Standards Board, in mid-February. Tweedie made his case for keeping the transition on its current – or close to – the current timeline. It’s also been reported that Schapiro has advised staff to review the current proposal to identify elements that can be used.
Actions do speak louder than words and the only real action to date is extending the deadline to comment on the proposed roadmap to April 20.
Next steps from the SEC . . . your guess is as good as mine. What are your expectations? Do you think the U.S. will transition to IFRS in the near future or has been this delayed extensively?
Take a look at some of these IFRS resources and recent news stories:
- Investment executives favor IFRS
- Big four firms push IFRS education efforts PwC unveils $700K grant, Deloitte readies materials
In May, The Ohio Society is also starting an International Special Interest Section. Watch for more details to come soon.