Throughout the talks of visions and realities, several major challenges and initiatives seemed to emerge as clear priorities that are sure to help shape the future of financial reporting.

1. January 2013
MHMMessenger
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M AY E R H O F F M A N M C C A N N P. C . – A N I N D E P E N D E N T C PA F I R M
A publication of the Professional Standards Group
From the AICPA’s Annual SEC/PCAOB Current Events Conference:
International Financial Reporting Standards (IFRS)
Major regulatory challenges and initiatives SEC Staff’s Final Report on the IFRS Work Plan.
Overall, she said, the report was designed to
Throughout the talks of visions and realities, several provide information to the Commission, and it did
major challenges and initiatives seemed to emerge as not set out to answer the fundamental question
clear priorities that are sure to help shape the future of of whether transitioning to IFRS is in the best
financial reporting. interests of the US securities market or investors.
This question will likely require additional analysis.
Challenge No. 1: How and when should the SEC
incorporate International Financial Reporting b. ASB Chairman Hans Hoogervorst reported that
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Standards (IFRS) into US financial reporting? over 100 countries now use IFRS, and the IASB is
gearing up for the next phase which will involve new
Acting SEC Chief Accountant Paul Beswick noted multilateral ways to engage with national standard
that the consideration of incorporating IFRS into US setters. Recently, the IFRS Foundation proposed
financial reporting could be the single most important a forum of standard-setters, and the IASB hopes
accounting determination for the Commission since the FASB will be a fully engaged partner in this
the SEC decided to look to the private sector to global forum. But Mr. Hoogervorst cautioned
establish accounting standards in the 1930s. He that US influence would be commensurate
said the SEC staff is working diligently to ensure the with its commitment to IASB’s standards.
Commission is properly informed of the issues in
preparation for the decision. Chairman Hoogervorst expressed frustration over
the state of convergence with US accounting
What to expect: Several regulators and standard- standards and the timing of the SEC’s decision.
setters provided insights into current and future He said he is concerned about the risk of
initiatives that may affect the SEC’s decision about increasing divergence after the formal program
IFRS. of convergence with the US has ended. He
added that many people around the world expect
a. enior Associate SEC Chief Accountant Jenifer
S a clearer indication of the US’s intentions with
Minke-Girard summarized the findings in the regard to IFRS after a decade of progress to bring
about convergence between US and international
standards.
c. FASB Chairman Leslie Seidman acknowledged
that the relationship between the FASB and IASB
is likely to change, but she said that doesn’t mean
our roots run deep TM
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2. MHMMessenger
the FASB thinks convergence is over or that be in a different position than most other countries
divergence will occur. She believes the FASB should with regard to some or all of these factors.
continue to work on the convergence projects and
perhaps continue to narrow differences between Challenge No. 2: What are the best ways to
US GAAP and IFRS using a less formal approach. provide implementation guidance on accounting
standard-setting projects and disclosure
Chairman Seidman described the FASB as the requirements?
“boots on the ground” in the US, and she explained
that it has been difficult to reach converged Mr. Beswick noted that the FASB and IASB have
standards because the needs of US stakeholders been working hard to converge accounting standards
are unique in several important respects. Most on major joint projects for revenue recognition,
notably: leasing, and financial instruments. But he cautioned
that coming up with converged standards is just
• The US needs clear and unambiguous standards the first step. A single set of high-quality global
to cope with quarterly reporting requirements standards cannot be achieved without consistent
and short timeframes in which to close the implementation guidance. He believes that consistent
books. implementation is important for both joint projects
of the FASB and IASB and purely domestic FASB-
• A standard must be capable of rigorous only projects. Implementation guidance on several
interpretation and application so that similar domestic projects could raise questions about the
events and transactions are accounted for overlap between the FASB’s standards and the SEC’s
similarly across time periods and among disclosure requirements.
companies.
What to expect: Mr. Beswick offered a few
• US stakeholders often need support in suggestions.
interpreting standards, even after the standards
have been issued. a. urrently, Mr. Beswick said, the SEC is working
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with other securities regulators around the world
d. dding more insights into the SEC’s thought
A to keep implementation of converged standards
process, Deputy SEC Chief Accountant Julie consistent. At the same time, he pointed out, some
Erhardt described the results of her research into trade organizations and others have been issuing
the reasons why other countries converted to their own non-authoritative implementation guides
IFRS. One reason is that some countries see it as to individual convergence projects. He said that
a domestic upgrade, meaning a way to improve his office and the FASB have been wondering
the quality of their accounting standards by buying whether it might be better to take a more holistic
a set of standards instead of developing them. A approach. The SEC welcomes suggestions in this
second reason is that the companies based in regard.
the country may need to convert to attract foreign
investors. A third reason is associated with foreign b. r. Beswick suggested that 2013 might be a
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access, that is, the extent to which converged good time to give some thought to how best to
standards will ease obstacles to the flow of capital avoid overlap in disclosure requirements or
from one capital market to another. The US may frameworks between the footnote disclosures
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3. MHMMessenger
required by the FASB’s standards and the non-
financial-statement disclosures required by SEC’s
regulations. As examples, he pointed to the FASB’s
projects on liquidity and interest rate disclosures,
going concern disclosures, and the disclosure
framework. Mr. Beswick said his office will host a
roundtable in the coming months as the first step
in considering an appropriate dividing line. Topics
to be discussed include the importance of liability
and auditing considerations.
The information in this MHM Messenger is a brief summary and may not include all the details relevant to your situation.
Please contact your MHM service provider to further discuss the impact on your financial statements.
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