By Anne Rosivach
Barry Melancon, American Institute of Certified Public Accountants (AICPA) president and CEO, and Paul Stahlin, AICPA chairman, stated in their letter dated August 17 to the Securities and Exchange Commission (SEC), that public companies in the United States should be allowed the option of adopting use of International Financial Reporting Standards (IFRS) as the SEC weighs a possible future framework for incorporating IFRS into the U.S. financial reporting system. Melancon and Stahlin wrote, "We believe U.S. issuers should be given the option to adopt IFRS as issued by the IASB."
The SEC is expected to decide later this year whether, and if so, how, public companies in this country should incorporate IFRS into their financial reporting. If the SEC decides to accept IFRS for U.S. issuers, it must decide whether to accept the timetables of the IASB and the Financial Reporting Standards Board (FASB) convergence projects or to use a convergence/endorsement model proposed by the SEC staff. The SEC model assumes the ongoing use of both IFRS and U.S. GAAP. It also will be necessary for the commission to decide how to incorporate future IFRS into U.S. GAAP.
The AICPA letter suggested that the IFRS option would not introduce complexity into what is already a very complex issue: "Anecdotal evidence suggests that the number of companies that would choose such an option would not be such that system-wide readiness would become an issue."
Melancon and Stahlin stated, "The AICPA supports the goal of a single set of high-quality, comprehensive financial reporting standards to be used by public companies in the preparation of transparent and comparable financial reports throughout the world. . . . We believe the standards issued by the IASB are best positioned to become those global standards. We, therefore, agree with the objective outlined in the Staff Paper that a U.S. issuer compliant with U.S. GAAP should also be able to represent that it is compliant with IFRS as issued by the IASB."
Going forward, during a transition period and beyond, the AICPA said that it "supports prospective application of the endorsed standards wherever possible. . . . Accordingly, after completion of the MoU priority projects, we recommend an endorsement process that would incorporate IFRS not subject to standard setting into U.S. GAAP for public companies at one point in time, with a date certain for adoption."
Melancon and Stahlin added that "any transition to IFRS in the United States needs to be a comprehensive undertaking. If IFRS are to serve as a basis for U.S. issuers financial reporting, there must be changes in the auditing and regulatory environments."
The letter also stated, "A central theme of the Staff Paper is the retention of U.S. GAAP and incorporation of IFRS into the Accounting Standards Codification through an endorsement process. The framework as outlined in the paper would directly affect U.S. GAAP for public and private entities, so this issue needs to be addressed. As it relates to private companies, we support the recommendations of the Blue Ribbon Panel on Private Company Financial Reporting for establishment of a separate board for developing exceptions and modifications to current U.S. GAAP for private companies. If a separate board was established, the FASB could focus on the endorsement of IFRS into the U.S. financial reporting system for public companies in a more effective and efficient way."
The AICPA letter was written in response to the SEC Staff Paper, "Work Plan for the Consideration of Incorporating International Financial Reporting Standards into the Financial Reporting System for U.S. Issuers – Exploring a Possible Method of Incorporation," which was issued in May.
Aug 25th 2011