Video interview:
Click here to watch former FASB member Ed Trott explain why he opposes the SEC’s plan to move to IFRS.

Video interview:
Click here to watch former Michael C. Fina CFO Mark Ellis explain why he believes IFRS is inevitable and will be good for small businesses in particular.

American companies that are allowed to use international accounting rules in their U.S. filings next year will still have to hold onto their U.S. GAAP knowledge.

In its proposed plan for transitioning all publicly traded companies to international financial reporting standards, the Securities and Exchange Commission has given commissioners room to change their minds in three years — raising the possibility that early adopters of its proposal will have wasted their time.

“Were the Commission to determine not to continue to permit or require additional U.S. issuers to use IFRS, the Commission would determine whether to require U.S. issuers that had elected the early use of IFRS to revert back to U.S. GAAP,” the SEC wrote in its proposed roadmap, which was released for a 90-day comment period on Friday, pending its filing in the Federal Register.

The proposal suggests that guinea pigs for the SEC’s plan envisioning an IFRS transition — companies that could pay an estimated $32 million in first-time costs — would need to retain certain records and controls in case they were later required to return to U.S. GAAP. Under the current plan, the SEC would vote in 2011 whether to move forward and require that all U.S. companies registered with the regulator use IFRS.

Indeed, the SEC has made it clear the 2011 vote will not be a “rubber stamp,” says Danita Ostling, Ernst & Young Americas IFRS technical leader. “It will be a robust decision based on their view of what’s best for the capital markets and what’s best for investors,” she tells CFO.com.

However, notes D.J. Gannon, a partner at Deloitte & Touche, the possibility of the SEC backtracking on its IFRS plans is slim. “It would be very difficult for the commission to turn back,” he tells CFO.com. “At this point, everything turns to the ultimate destination [toward IFRS] but how long will that journey take?”

If the SEC goes ahead with its current plan, all U.S. publicly traded companies will submit IFRS-prepared financial statements for years ending after Dec. 15, 2016. In the meantime, the U.S. and international accounting standard-setters have pledged to wrap up their convergence project by 2011. They may be pressured to work even faster; after Saturdays G20 meeting on the global financial crisis, top world leaders declared that the rule-makers “should work intensively toward the objective of creating a single, high-quality global standard.”

However, the fact that standard-setters still have differences to work out between their rules has Nick Cyprus, controller and chief accounting officer of General Motors, wary of adopting IFRS early. “If I lead and there’s changes going on in the convergence process, it’s going to be costly,” he said today at the annual Financial Executives International conference on financial reporting in New York City. Moreover, he noted, early adopters will have to pay more to make up for the lack of IFRS resources available in the United States.

For that reason, the SEC hopes that companies will take the regulator up on its offer to apply IFRS early, so that they can be test cases for transitioning other businesses later on and for “creating additional, but manageable, demand for IFRS-related services at this time,” the commission wrote in the roadmap. Adds Ostling, “Both the SEC and investors, as well as companies themselves, are going to learn a lot from those early adopters, who will pave the way for companies coming on later.”

To be sure, some large multinational companies already required to use IFRS in their overseas reporting would like to cut back on one set of accounting rules before the standard-setters complete their work. But not all of those that want to can become an early adopter under the SEC proposal, which PricewaterhouseCoopers partner and global IFRS specialist Richard Fuchs called “far too limited” in its scope.

As proposed, only the top 20 companies in each industry would be given the allowance, based on market capitalization and whether IFRS is the most dominant accounting language used by their top 19 competitors. The SEC estimates at least 110 companies in about 34 industries could be eligible to receive its permission to adopt IFRS for its regulatory filings for fiscal years ended after December 15, 2009. The so-called “IFRS industries” where companies are more likely to use the international rules over GAAP include energy, oil and gas, and some retail and manufacturing sectors, Gannon says.

Gannon expects the SEC will receive lots of suggestions from commenters wanting the SEC to widen its early-adoption allowance. “I’m not sure I would limit the notion just to industry competition,” he says. “There are other factors the commission may want to consider.”

Then again, the SEC may have a hard time finding volunteers. Talia Griep, controller of Honeywell International, told attendees of the FEI conference today that finance executives are too busy dealing with the financial crisis to consider IFRS. “They’re trying to stay ahead of what’s going on with their businesses as they face the worst economic environment in a very long time,” she says. “It’s just a tall order to ask of any executives.”