CFOs urge the SEC to drop a proposal mandating U.S. companies to use the international accounting rules.
Marie Leone, CFO.com | US
April 17, 2009
The text of my IFRS comment letter follows: The scope of this comment letter is limited to the costs and benefits of FINANCIAL STATEMENTS PREPARED IN ACCORDANCE WITH INTERNATIONAL FINANCIAL REPORTING STANDARDS BY U.S. ISSUERS. Costs W. Edwards Deming, the American that transformed Japan after WWII, is well known for his quote: "The most important things are unknown or unknowable." The factors that have the greatest impact, long term, can be quite surprising. One example of an additional cost to U.S. issuers, in connection with adopting IFRS, is potentially higher external auditors? professional liability insurance premiums resulting from increased malpractice risk with judgment-based IFRS. The seminar, "Malpractice risks: Navigating the New Frontier", given in connection with the AICPA Professional Liability Insurance programs, highlighted the risks that can lead to malpractice claims. Many malpractice suits are based on the perceived misapplication of financial reporting standards, with a high correlation between the ambiguity of a financial reporting standard and the percentage of related malpractice suits. With IFRS being more a judgment-based than GAAP, more malpractice suits can be expected to result under IFRS than currently under GAAP. Benefits American business has great respect for the 80-20 rule however this respect has often been found in the regulator arena. If IFRS was adopted by only those U.S. Issuers that believed they would achieve a favorable benefit/cost relationship, the merits of the 80-20 rule would be honored by the Commission on the IRFS issue. I recommend that the adoption of IFRS be optional for all U.S. Issuers and mandatory for none. This should result is as close to an optimal benefit/cost relationship, as is possible. This approach is also consistent with the flexibility extended to foreign private issuers by the Commission. Thank you for the opportunity to submit a comment letter and especially for extending the comment period to April 20, 2009
Posted by Hugh Campbell | May 07, 2009 08:45 am
We have seen the failings of a rules-based accounting standards. They provide avenues for frauds to be committed under the guise of compliance. America missed the boat on metriculation(ie use of km. lit etc). Let not this another missed boat for America.
Posted by Kok Tang | May 02, 2009 09:49 pm
The big-4 CPA firms, the AICPA, and a cabal of anti-investor business leaders started the grand march to foist IFRS on the U.S. Notably they never bothered to do a study of the costs involved, nor have they attempted to assess the likely effect on fraudulent financial reporting. The reasons they never did this are obvious. Implementing IFRS will not only be extremely expensive, but will cause fraud to skyrocket. Remember, the groups favoring IFRS are the same groups favoring even more deregulation and elimination of protections of investors. That tells you all you need to know. A vote for IFRS is a vote for fraud, higher costs, and less protection of investors.
Posted by Ralph Adamo | April 21, 2009 01:18 pm
The purpose of financial reporting is to inform the investor about the value of their investment when compared to other potential investments. With global investing opportunities, how can the investor compare apples to apples if the reporting methods are different? While there will be huge investments of capital and time to convert and the need of the investor to understand the adjustments, in the long run, this will be of great value to the investor and that should be the focus of the financial community.
Posted by Howard Berner | April 20, 2009 11:09 am
It's not clear to me, given the "flat line" state of the world ecomony, why we need to move forward on this initiative. Right now no one beleives anything they are told or read no matter what langauge is used. Until we restore some confidence in our global financial systems, and it needs to start right here in the good old USA, why bother confusing matters and potentially damaging any hope of a recovery. We hit an iceberg and the ship is sinking but the captain is concerned about what color tie to wear for the evenings ball.
Posted by Rick Macchiarulo | April 20, 2009 08:42 am
IFRS is a scam that will spell disaster for our markets and our investors. It was originally intended and always intended (since 1973) to bring the rest of the world up to US GAAP standards. But then Bush and his little puppet Cristopher Cox hi-jacked it a few years ago. They're gone now and so soon will IFRS. We're CPA's not sheep. The public has a right to standards that maintain accountability and consistency -- read RULES BASED standards. It would be a huge mistake to let companies pick and choose from a buffet of principles based standards that fit their needs at any given moment. Have we learned nothing from Enron and W's famous family friend "little Kenny" Lay?
Posted by Randall Enders | April 20, 2009 08:28 am
Singapore shifted to IFRS three years. A documented study on how this was achieved, what were the motivations, and what were the results would be of much higher interest than asking accountants whether they feel comfortable getting outside their comfort zone...
Posted by Christophe Richard | April 19, 2009 02:13 am© CFO Publishing Corporation 2009. All rights reserved.