Support for IFRS Noticeably Absent from the SEC Strategic Plan for Fiscal Years 2014-2018
- Feb 18, 2014
- Marc Fogarty
The Securities and Exchange Commission (SEC) has released its draft 2014-2018 Strategic Plan. Notably absent from the document is the SEC’s support for international financial reporting standards (IFRS).
In the SEC Strategic Plan for years 2010-2015, the document states “…the agency will promote high-quality financial reporting worldwide through, among other things, support for a single set of high-quality global accounting standards and promotion of the ongoing convergence initiatives between the FASB and the International Accounting Standards Board.” In the new SEC draft, it is stated that “…the agency will work to promote higher quality financial reporting worldwide and will consider, among other things, whether a single set of high-quality global accounting standards is achievable.”
IFRS was a hot bed for discussion several years ago. As stated in the 2010-2015 plan, “In June 2009, the U.S. Department of the Treasury published key objectives for reform of the financial regulatory system… (r)aising international regulatory standards and cooperation, including working toward improvement of accounting standards in the wake of the credit crisis and the development of a single set of high-quality global accounting standards.”
The current SEC draft’s change in approach could have to do with different SEC chairs, who are nominated by the President, and may have a different agenda. The most likely reason may have to do with the cost of changing the current system. To examine this possibility, let’s look at the systems of measurement used by various countries.
In the 1970s, there was a push for a global measurement standard, and we were told that the metric system (millimeters and centimeters) would replace the English system (inches and feet). It’s not that either system of measurement was faulty, but it was reasonable to want global convergence so everyone would be working with the same unit of measurement.
As you know, we still have both systems of measurement and the resistance in parting with the English measurement system may very well be related to the wide-spread cost of the change. If America had changed to the metric system, think of all the things that would have been impacted. Our entire transportation infrastructure such as mile markers, maps, vehicle odometers, gas pumps, etc. would all need a total overhaul. There is a cost to changing any international standard, and perhaps cost is a factor in why the SEC is reconsidering their earlier ambitions and shifting to see if “global accounting standards is achievable.”
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Marc Fogarty, Audit Partner and National Biotech Sector Leader, within Technology and Life Sciences Group, and member of the firm's Public Companies, Cleantech and International Services Groups. Marc is experienced in public accounting, serving public and private organizations and has presented on IFRS to professional groups.
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