(The article featured
below is a selection from International
Securities and Financial Reporting Update, which is available to subscribers
of that publication.)
SEC Chair Schapiro Backs Off From IFRS Roadmap
SEC Chair Mary Schapiro said the Commission would proceed to implement IFRS
with great caution in order to avoid a race to the standard-setting bottom. In
testimony before the Senate Banking Committee, the new SEC Chair said that she
does not feel bound by the existing roadmap that the Commission put out for
comment last year. She intends to "take a big deep breath" and
carefully examine this entire area again.
While she applauds a single set of global accounting standards as a very
beneficial thing, allowing investors to compare companies around the world, she
has concerns with the roadmap that has been published by the SEC. A main concern
is about the IFRS standards generally. They are not as detailed as U.S. GAAP
standards, she noted, with a lot left to interpretation. Moreover, even if they
are adopted, there will still be a lack of consistency around the world in how
they are implemented and how they are enforced.
In addition, the cost to switch from U.S. GAAP to IFRS is going to be
extraordinary, she noted, with some estimates ranging as high as $30 million for
each U.S. company. This is a time, she said, when regulators must think
carefully about whether it makes sense to impose those sorts of costs on U.S.
industry.
But perhaps her greatest concern is the independence of the International
Accounting Standards Board and the ability to have oversight of the Board's
process for setting standards and the amount of rigor that exists in that
process today.
Sensitive to such criticism, the oversight trustees of the International
Accounting Standards Board have proposed a Monitoring Group composed of the SEC
and other securities authorities. The SEC welcomed the creation of the
monitoring group as a way of providing organized interaction between the IASB
and national securities regulators responsible for the adoption or recognition
of accounting standards for listed companies.
The monitoring group will be composed of the SEC Chair, the European
Commissioner for the Internal Market, the IMF managing director, two IOSCO
senior officials, the Commissioner of the Japanese Financial Services Agency,
and the President of the World Bank. CESR's bid for a seat on the monitoring
group appears to have failed and banking regulators have been excluded.
At a recent IASB roundtable, SEC Deputy Chief Accountant Julie Erhardt said
that there was a need to create a mechanism for the interaction between
securities authorities and the oversight trustees that approximates the
historical relationship between securities authorities and accounting standards
setters, such as the relationship between the SEC and FASB. In turn, she
continued, this will enable securities authorities that allow or require the use
of IFRS to effectively discharge their own mandates relating to investor
protection, market integrity and capital formation. The SEC has been assured
that the monitoring group will not affect the independence of the standard
setting process.
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