Grant Thornton has been, and continues to be, a staunch supporter of the ongoing movement toward one set of high-quality, globally accepted accounting standards. As CPAs, we view financial reporting as a unique language used to communicate the economic results of a company’s activities and fiscal health. At present, that language features several different dialects, depending on where a company operates.
Based on recent trends, that language is most likely to be International Financial Reporting Standards (IFRS). Currently, more than 100 countries either permit or require IFRS for financial reporting. The European Union adopted IFRS for its listed companies in 2005, replacing more than 20 different accounting languages with IFRS virtually overnight. The United States, the world’s largest economy, however, remains notably absent from the IFRS party.
Like many in this country and elsewhere, we were hoping that the U.S. Securities and Exchange Commission (SEC) would announce a mandatory date for switching to IFRS by U.S. public companies. Instead, the Commission reaffirmed that it expected to decide in 2011, provided resolution of certain issues. The current FASB/IASB convergence projects underway must be completed, and six provisions of a staff work plan must be addressed. Although some of these areas carry over from the November 2008 “Roadmap” release, new areas of focus have been added, including an examination of the U.S. regulatory environment, and an analysis of the scope and timing impact on issuers in the context of compliance with corporate governance provisions. In our view, however, reaffirming that you will decide is not the same as deciding.
There is no question that the decision to mandate IFRS is a critical one – one not to be taken lightly. To inform that decision, the steps announced today would be helpful, but are they truly necessary? Until there is a decision, until people have at least a tentative date, there will be almost no movement toward adoption.
The stakes are high. Whether the U.S. races or crawls toward IFRS could mean the difference between staying in front or falling behind. The rest of the world is moving forward, boldly. Major economies like Japan, China, and India already have chosen IFRS. It is unrealistic — and risky — to think that we can stand outside looking in forever. If we don’t want our influence and opportunities stripped away, we must make sure that we keep a seat at the table.
Taking the longer view, with establishing one financial reporting language as the goal, we view the SEC announcement as a step forward. The announcement is on course with the “Roadmap” that was issued in November 2008. We applaud Chairman Mary Shapiro, Chief Accountant Jim Kroeker, and others at the SEC for their time and effort spent poring over the 200-plus comment letters, considering the multitude of issues, and debating a final decision to switch accounting standards in the U.S.
About Grant Thornton LLP: