SEC publishes IFRS roadmap for 90-day review

Rule could require U.S. registrants to use IFRS beginning in 2014

The SEC released its proposed roadmap for the transition of U.S. public companies to the International Financial Reporting Standards (IFRS).

The long-awaited roadmap is open for a 90-day review, which moves its potential adoption into the administration of the new SEC Chairman to be selected by President-elect Barack Obama. The search for a successor to current SEC Chairman Christopher Cox is under way.

The roadmap identified seven milestones that, if achieved, could require U.S. public companies that file with the SEC to use IFRS by 2014. Under the proposal, in 2011 the SEC will determine whether to proceed with rulemaking for this requirement.

Key milestones include:

1. Improvements in accounting standards
2. Accountability and funding of the IASC Foundation
3. Improvement in the ability to use interactive data for IFRS reporting
4. Education and training relating to IFRS
5. Limited early use of IFRS where this would enhance comparability for U.S. investors
6. Anticipated timing of future rulemaking by the Commission
7. Implementation of the mandatory use of IFRS by U.S. issuers

Early adoption

Early adoption by the nation’s 110 largest issuers would be allowed as early as 2010, for 2009 financial statements. The SEC estimates that early adoption would cost approximately $32 million per company for the first three years of filings on Form 10-K under IFRS.

In a staged transition, IFRS filings would begin for large accelerated filers for fiscal years ending on or after Dec. 15, 2014. Remaining accelerated filers would begin IFRS filings for years ending on or after Dec. 15, 2015. Non-accelerated filers, including smaller reporting companies, would begin IFRS filings for years ending on or after Dec. 15, 2016.

Alternative proposals for GAAP disclosure

The roadmap provides for two alternative proposals which are also open for comment.  Under these proposals, U.S. issuers that elect to use IFRS would disclose U.S. GAAP information.

• Proposal A
  U.S. issuers that elect to file IFRS financial statements would provide the reconciling information from U.S. GAAP to IFRS under IFRS 1, First-time Adoption of International Financial Reporting Standards, in a footnote to its audited financial statements.
  
• Proposal B
  U.S. issuers that elect to file IFRS financial statements would provide the reconciling information from U.S. GAAP to IFRS required under IFRS 1  and would also disclose on an annual basis certain unaudited supplemental U.S. GAAP financial information covering a three-year period.

Web videos highlight the debate on both sides

• Arleen Thomas, CPA, AICPA senior vice president – member competency and development, reports on proposed roadmap and the seven milestones
• Former FASB member Ed Trott explains his opposition to the SEC’s plan to move to IFRS
• Former Michael C. Fina CFO believes IFRS is inevitable and will be good for small businesses in particular 

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