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Future
Prospects of IFRS
Excerpt
of speech by SEC Chief Accountant James Schnurr
34th
Annual SEC and Financial Reporting Institute Conference
This time
last year, I had just retired after spending 30 years as an audit partner, and
I was approached by Chair White to be the Chief Accountant. One topic we
discussed was her speech in May 2014[4]. Chair White indicated that she was making
IFRS a priority and would be asking me to advise her on the next step forward
if I were to be appointed. Although retired, I read with great interest the
attention grabbing headlines from former Chairman Cox’s keynote address at this
conference last year that we should “bury IFRS[5].”
Since arriving at the Commission last October, I have spent considerable time
with my staff and others researching and discussing IFRS, and I believe
Chairman Cox’s burial of IFRS entirely may have been premature.
As I
mentioned publicly last month,[6] the staff has
recently heard from a number of different constituents about IFRS: preparers,
investors, auditors, regulators and standard-setters. We heard three key themes
through those discussions:
·
There is virtually no support to have
the SEC mandate IFRS for all registrants.
·
There is little support for the SEC to
provide an option allowing domestic registrants to prepare their financial
statements under IFRS.
·
There is continued support for the objective
of a single set of high-quality, globally accepted accounting standards.
So, while
full scale adoption or an option does not appear to have support, it does not
mean we “bury” the underlying objective of a single set of high-quality,
globally accepted accounting standards. On the contrary, constituents continue
to support that idea. So, the real questions are: what is the path to achieve
that objective and how do we get there?
In my
opinion, in the near term, FASB[7] and IASB[8] should
continue to focus on converging the standards. The boards should renew their
commitment to cooperate and develop standards that eliminate differences
between IFRS and U.S. GAAP[9] whenever it meets the
needs of its constituents and improves the quality of financial reporting. I
recognize the boards will not always be able to eliminate differences during
the standard-setting process, primarily because they serve different
constituents that have different needs. However, when differences in standards
arise, the boards should monitor the implementation of those standards with the
objective of learning from the implementation and re-engaging with each other
with the goal of converging to the standard with the highest quality financial
reporting outcome. The boards should apply the lessons learned from the recent
revenue recognition standard and realize that even though the words may be the
same, to achieve convergence, cooperation is needed after the standard-setting
process is complete and during the implementation stage of the standards.
Finally, the FAF[10] and IFRS Foundation should be
supportive of the underlying objective and provide their respective boards with
the support necessary to achieve convergence.
Let me
close our IFRS discussion by repeating some comments I made about a month ago[11]. I believe that, for the foreseeable future,
continued collaboration is the only realistic path to further the objective of
a single set of high-quality, global accounting standards. Accordingly, how the
FAF, IFRS Foundation, FASB and IASB decide to interact in the future is
critical to the advancement of the objective of a single set of high-quality,
globally accepted accounting standards.
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