Why the SEC Won't Mandate IFRS Adoption

Source: CPA Success

The following includes excerpts, reproduced with permission, from a September 8 blog entry.

In a recent column on CFO.com, Bruce Pounder takes a different tack in the IFRS argument – one that focuses on risk analysis rather than on pros and cons.

Pounder, immediate past chair of the Small Business Financial and Regulatory Affairs Committee of the Institute of Management Accountants, focuses on the generally accepted worst-case IFRS scenario – that the SEC would force U.S. public companies to switch from GAAP to IFRS “without substantial standard-level convergence having been attained between the two sets of rules.”

That scenario presents very little risk to U.S. companies. And why? Because it won't happen. Writes Pounder:

“First, the SEC has clearly communicated that the less standard-level convergence between U.S. GAAP and IFRS is attained, the less the SEC will be inclined to even consider a switch from one to the other.

“Second, the SEC is simply not stupid enough to saddle U.S. companies with avoidable costs while we remain in the shadow of the global financial crisis.

“Third, and most significantly, for the SEC to order a switch from future U.S. GAAP to future IFRS despite substantial differences between those sets of standards, the SEC would have to conclude that FASB and its standard-setting predecessors completely failed to get U.S. GAAP ‘right.'”

According to Pounder, U.S. companies are better off focusing on the “profound changes to U.S. GAAP” that convergence efforts have already started to produce.

For the complete blog entry, read “IFRS: Can you handle the risk?”

From CPA Success, the blog of the Maryland Association of CPAs, www.cpasuccess.com, September 8, 2010.