SEC Releases Statement Regarding Convergence of U.S. GAAP with IFRS Accounting Standards
On February 24th, 2010, the U.S. Securities and Exchange Commission (SEC) released a “Statement in Support of Convergence and Global Accounting.” This is the first statement of the SEC considering the transition from U.S. GAAP to International Financial Reporting Standards (IFRS) since November of 2008.
In its statement, the SEC:
- supports the objective of financial reporting in the global markets pursuant to a single set of high-quality globally accepted accounting standards;
- encourages the convergence of U.S. GAAP and IFRS;
- attaches a “Work Plan” for its staff to lay out the work that must be done to support the decision of the SEC (to be taken in 2011) on the appropriate course to incorporate IFRS into the U.S. financial reporting system for U.S. issuers, including the scope, timeframe, and methodology for any such transition;
- indicates that if the Commission determines in 2011 to incorporate IFRS into the U.S. domestic reporting system, the first time U.S. issuers would report under such a system would be approximately 2015 or 2016, such timing to be considered further under the Work Plan;
- states that it will provide public progress reports on the Work Plan beginning no later than October 2010 and frequently thereafter until the work is complete.
The related press release from the SEC includes a list of transition issues that will be addressed in the Work Plan.
In Canada, Canadian GAAP for publicly accountable enterprises will be replaced by IFRS for fiscal years beginning on or after January 1, 2011. For comparative purposes, domestic issuers must also present a set financial statements prepared in accordance with Canadian GAAP and a set prepared in accordance with IFRS for the fiscal immediately prior to their required adoption of IFRS. Therefore, enterprises with fiscal years commencing on January 1st must present these separate statements for the period beginning on January 1, 2010 and adopt IFRS for the period beginning January 1, 2011.
For financing transactions, the transition to IFRS may impact items such as financial disclosure requirements and the outcome of ratios in financial covenants. The documentation for existing arrangements may need to be revisited to determine the impact of this transition.
