For more than a year, Corporate America has been waiting for the Securities and Exchange Commission to decide whether to allow or require public companies to adopt international financial reporting standards. Expect the wait to continue: at a Wednesday conference for corporate attorneys, SEC officials declined to specify when they'll make a decision.
If the initial "roadmap" to IFRS -- first proposed in fall 2008 -- had been approved, some of the largest companies could have started using international standards in their U.S. filings last month. But now, companies are unsure how to move forward. Consultants and accounting firms that were pushing clients to make serious changes to their computer systems and financial-reporting processes have since quieted down as the SEC's intentions have become less clear.
Moreover, for the second time in less than two weeks, SEC chief accountant James Kroeker discouraged companies from giving much thought to how they would change over from U.S. GAAP to the global rules. "My advice is you shouldn't be implementing new systems now," he told the attorneys. Meredith Cross, director of the SEC's corporate-finance division, added that the SEC's eventual plan would give companies "ample time" to transition to a new reporting system.
Still, Kroeker believes companies should continue to pay attention to the convergence efforts going on and give the standard-setters feedback. These efforts include major changes to accounting for leases, financial instruments, pensions, and revenue recognition.
Of course, the general assumption is that all this talk should be moot in about a year, as FASB and the IASB have set June 2011 as a deadline for converging financial standards. But as anyone who listens to their joint meetings can tell you, that date seems less and less realistic. Last week, for example, in their initial discussion on how to measure financial liabilities in their financial-instruments project, they were still working off of two different models. Plus, they have saved the most complicated issues for last and are trying to march through them as quickly as possible -- which will likely result in reams of follow-up tweaks to the new rules later.
Indeed, warns Jay Hanson, national director of accounting at McGladrey & Pullen, CFOs should expect a "tsunami of new standards" coming down the standard-setters' pike. In other words, finance departments will have to address an abundance of financial-reporting quandaries even if crucial questions surrounding a switch from GAAP to IFRS are deferred. |
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