The SEC staff has issued a Final Report on its Work Plan for considering the incorporation of international financial reporting standards (IFRS) into the U.S. financial reporting system. At stake is whether, when, and how U.S. companies will be permitted or required to use IFRS in financial statements filed with the SEC. The Work Plan was initiated in February 2010, as a means for the SEC staff to obtain information relevant to answering these questions.

At that time, SEC Chairman Mary Schapiro expressed her expectation that in 2011 the SEC would be able to make a recommendation concerning IFRS incorporation. However, the Final Report on the Work Plan indicates thatthe staff has identified a number of issues that cast doubt on when any final SEC recommendation will be forthcoming and what that recommendation will be.

Among other things, the Final Report concludes that:

  • IFRS provides less tailored guidance than U.S. GAAP for certain types of companies—including investment companies, broker-dealers, and insurance companies—and more consideration needs to be given to such discrepancies.
  • Requiring a complete conversion to IFRS over a short time frame would impose very substantial direct and indirect costs on U.S. companies.
  • The International Accounting Standards Board (IASB) should do more to address issues and provide authoritative guidance on IFRS on a timely basis.
  • IFRS is applied differently by different countries, and more cooperation among countries’ regulators is required in order to achieve all the intended benefits of an international system.
  • The IASB’s reliance on major public accounting firms for much of its funding raises governance concerns in that body’s role as IFRS standard setter.