On August 27, the Securities and Exchange Commission voted to publish for public comment a proposed “Roadmap” that could lead to the required use of International Financial Reporting Standards (IFRS) by U.S. issuers. As proposed in the Roadmap, the SEC would make a decision in 2011 on whether to mandate the filing of IFRS financial statements by U.S. companies beginning with the 2014 fiscal year. IFRS is now required or permitted in over 100 countries, including all of the countries in Europe, according to SEC Chairman Christopher Cox.
The proposed Roadmap sets out milestones which, if achieved, could lead to the SEC’s decision on permitted or mandatory use of IFRS by U.S. issuers. The milestones relate to: improvements in accounting standards; the accountability and funding of the International Accounting Standards Committee Foundation; improvement in the ability to use interactive data for IFRS reporting; education and training in the U.S. relating to IFRS among investors, auditors and others; the limited early use of IFRS; the timing of future rulemaking by the SEC; and the implementation of the mandatory use of IFRS, including considerations relating to whether the mandatory use of IFRS should be staged or sequenced among groups of companies based on their market capitalization.
The Roadmap contains a proposal to permit a limited number of eligible U.S. issuers to use IFRS before a mandatory date. The objective is to identify those categories of U.S. issuers for whom the use of IFRS would promote enhanced comparability with their significant global industry competitors. Eligibility would be limited to the 20 largest public companies in one industry on a global basis, assuming IFRS is used more often than any other basis of accounting by the 20 largest companies in that industry on a global basis.
Public comment on the SEC’s proposing release should be received by the SEC no later than 60 days after its publication in the Federal Register. The full text of the SEC’s proposing release will be posted on the SEC website as soon as possible.