What Happened to IFRS Initiatives? Are Global Accounting Standards Just Too Far out of Reach?
July 02, 2014
By Marc Fogarty, CPA, CFE
As you may recall from my earlier blog, Support for IFRS Noticeably Absent from the SEC Strategic Plan for Fiscal Years 2014-2018, IFRS initiatives have lost steam over the years. The former chairman of the SEC., Chris Cox, had tried to bring international accounting rules to the U.S. while he was in office; however, now he says it is unlikely that the U.S. will replace GAAP with IFRS. What has changed?
In 2008, a proposed IFRS roadmap was published by the SEC while Mr. Cox was chairman. The financial crisis that followed seemed to put IFRS out of the limelight. The 2012 SEC staff report said that adopting international rules was “not supported by the vast majority of participants in the U.S. capital markets.” This was partially due to the cost of making changes.
But, six years later, there are still IFRS supporters and it is thought that the current SEC chairwoman, Mary Jo White, might be open to adopting international rules. There is still a chance that U.S. multinational companies will be allowed to change to International Financial Reporting Standards if they want to. This would enable U.S. companies to use the same rules as their foreign competitors, which would provide the benefit of making comparisons easier for investors.
Our country's unwillingness to change, perhaps from the belief that there is nothing broken with our system or doing so will create unnecessary costs, will affect other countries as well. A possible end result may be a global decision that companies can choose the rules they want to follow. For instance, Japanese companies can choose from Japanese GAAP, U.S. GAAP and IFRS.
It appears that globally we are heading farther from IFRS. With prominent people, like Mr. Cox, discussing the measure pessimistically, it seems less likely global accounting standards will be in our future.