At an open meeting held today, the five Commissioners of the Securities and Exchange Commission (SEC) voted unanimously to issue a statement reaffirming the SEC’s commitment to determine whether to move U.S. companies towards the use of global accounting standards, or International Financial Reporting Standards (IFRS) for financial reporting, instead of U.S. Generally Accepted Accounting Principals (GAAP). The statement adopted by the SEC, which has not yet been made publicly available, is intended to reaffirm the SEC’s support for a single set of globally-accepted accounting standards, describe the various issues that need to be further examined and specify the events that must occur between now and 2011, the target date set forth in the Proposed Roadmap. The Proposed Roadmap set forth the various key milestones that, if met, will lead to a determination by the SEC in 2011 as to whether to adopt the mandatory use of IFRS by U.S. issuers beginning in the year 2014.
The Commissioners expressed their general support for the development of a single set of high-quality accounting standards, but also noted that incorporating IFRS into the U.S. financial reporting system would be a significant undertaking. In response to comments received on the Proposed Roadmap and to aid the Commissioners as they evaluate the impact the use of IFRS by U.S. companies will have on U.S. securities markets, the SEC staff has developed a work plan specifying areas on which their fact-gathering efforts will focus in order to identify whether, when and how U.S. issuers should implement IFRS.
The adopted statement directs the SEC staff to execute the specific steps and affirmative actions identified in the work plan, which addresses the following concerns highlighted by commenters to the Proposed Roadmap:
- Sufficient development and application of IFRS for the U.S. reporting system;
- Independence of accounting standard-setting process;
- Investor education and understanding of IFRS;
- Examination of U.S. regulatory environments that could be affected by a change in accounting standards;
- Impact on large and small issuers due to a change in accounting standards and with regard to corporate governance and litigation considerations; and
- Human capital readiness.
For additonal information, see Alston & Bird's Special Alert on this topic.