NEW YORK (Reuters) - Accountants have increasingly felt in recent years that it was only a matter of time until the United States adopted international accounting standards. Now, U.S. securities regulators may have thrown the whole system into flux.
The Securities and Exchange Commission appeared on Wednesday to abandon a road map that could have had U.S. firms reporting in International Financial Reporting Standards as soon as 2014. Instead the investor protection agency said it would commit to a new “work plan” that would delay any move to international standards until at least 2015.
The United States is the last major economy operating off of its own set of accounting rules. While maintaining the status quo could prove to be a popular decision in the United States, some experts said it could send the wrong message to the rest of the world.
“Stakeholders across the world have been awaiting clear signals from the Securities and Exchange Commission as to how and when it is going to start the process of completing the convergence to International Financial Reporting Standards (IFRS),” said Dr. Nigel Sleigh-Johnson, head of the Institute of Chartered Accountants in England and Wales Financial Reporting Faculty.
More than 110 countries have already adopted or announced intentions to adopt IFRS, which is viewed as more principle-based and more concise that U.S. Generally Accepted Accounting Principles (GAAP), which rely on specifically outlined rules.
The London-based International Accounting Standards Board (IASB) and Norwalk, Connecticut-based Financial Accounting Standards Board (FASB) are under a June 2011 deadline set by the G-20 to complete major convergence projects so that the two sets of standards will be more aligned.
SEC Chairman Mary Schapiro said on Wednesday the SEC still supports the creation of a single set of high-quality globally accepted accounting standards, but the U.S. is only at the beginning of its discussion about how to get there.
The commission backed off an earlier plan that would have encouraged early adoption of IFRS in the United States and did not say whether it would adopt the standard at all.
While the SEC staff will look to address concerns in the United States about IFRS over the next year, the lack of commitment to the standard disappointed many.
“If you look at this from the international community’s perspective, it could be seen as a signal that the U.S. is still not fully committed,” said Stephen Chipman, chief executive of accounting firm Grant Thornton LLP.
The U.S. has traditionally had broad influence on the IASB, with several of the board’s members from the United States, but political pressure on the board has increased since the global financial crisis and controversy over mark-to-market accounting. Some worry the lack of a clear timeline could jeopardize the United States having a seat at the table.
“It’s going to be harder and harder to influence the process the longer we sit on the sidelines,” Chipman said.
Chipman said the move would probably be welcomed by companies in the United States as many worried about the cost of switching to IFRS in the middle of a difficult economic period.
The SEC said it would give more details on its timeline next year.
“It’s just a matter of time for the U.S. to move to IFRS,” said Cindy Fornelli, executive director of the Center for Audit Quality in Washington, D.C. “The train left the station 110 countries ago.”
Fornelli said it was important for the United States to focus not just on whether to adopt IFRS, but also whether the rules could be consistently applied, interpreted and enforced by U.S. companies, regulators and auditors.
Reporting by Emily Chasan; editing by Andre Grenon
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