Earlier this year, the leadership at the United States Securities and Exchange Commission (the “SEC”) directed its staff at the Office of the Chief Accountant to develop a Work Plan to consider the convergence of the U.S. Generally Accepted Accounting Standards ("GAAP") and the International Financial Reporting Standards (“IFRS”). Separately, the Financial Accounting Standards Board, which oversees the promulgation of GAAP, and the International Accounting Standards Board, which performs a similar function for IFRS, are in the midst of a convergence effort. Information garnered from the Work Plan will be used by the SEC to determine the implications of incorporating IFRS into the financial reporting system for U.S. publicly traded companies. This first Progress Report has been a long awaited update on analysis done so far by the SEC.
The Progress Report provides an update on the following six key areas of the Work Plan:
- Sufficient development and application of IFRS for the U.S. domestic reporting system.
- The independence of standard setting for the benefit of investors.
- Investor understanding and education regarding IFRS.
- Examination of the U.S. regulatory environment that would be affected by a change in accounting standards.
- The impact on issuers both large and small, including changes to accounting systems, changes to contractual arrangements, corporate governance considerations, and litigation contingencies.
- Human capital readiness.
The SEC expects to continue to issue periodic progress reports on the status of the Work Plan in 2011.