SEC staff pans direct adoption of global accounting
NEW YORK (Reuters) - A full-scale adoption of international accounting standards by the United States has little support and few investors or companies are prepared for it, the U.S. Securities and Exchange Commission said on Friday.
In a long-awaited staff report, the SEC said a wholesale switch to international standards would strain the resources of U.S. companies and a staged transition has more support.
The SEC, responsible for U.S. accounting rules, has for years been weighing a decision on whether to move U.S. companies to international financial reporting standards, known as IFRS and set by the London-based International Accounting Standards Board.
More than 100 countries have switched to IFRS, while the United States still uses generally accepted accounting principles, or GAAP.
SEC commissioners have been waiting on the staff report to help them make a decision on whether to switch to international standards. The report made no recommendations but outlined many drawbacks of IFRS, especially a wholesale switch.
Accounting experts said it held few surprises.
"The SEC essentially had zero likelihood of choosing (full-scale) adoption," said Bruce Pounder, director of professional programs for SmartPros, a firm that provides education for accountants.
"The influence that the SEC would have over IASB, even under the most cordial of relationships, is clearly not at the level that Americans would be comfortable with," he said.
SEC commissioners could decide differently but are unlikely to ignore the staff report, he said.
The report made clear that the staff ruled out direct adoption early on and focused on approaches that would keep an active role for the Financial Accounting Standards Board, which is responsible for GAAP.
Last year, the staff outlined an alternative of gradually incorporating international standards into GAAP over time.
The SEC was expected to make a decision on a switch last year but still does not appear close to a verdict. One complication was last month's announcement the agency's chief accountant James Kroeker would be leaving this month. Kroeker had been guiding the staff work on international standards.
The staff report also raised questions about whether one set of global accounting standards would make financial statements around the world comparable, as IFRS promoters have suggested.
"Enforcement structures around the world differ widely by jurisdiction," the report said. For examples, regulators vary widely in how often they review financial statements, and more coordination may be needed, the SEC said.
The SEC said it is seeking comment on the report.
(Reporting By Dena Aubin; Editing by David Gregorio)
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