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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

[Full text of speech]

 

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.

 

[Full text of speech]

 

 

 

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