US regulators face fight on IFRS accounting cost

NEW YORK, Nov 18 (Reuters) - Just four days after releasing a formal “roadmap” proposal to move U.S. companies to international accounting rules, U.S. regulators are facing a slew of complaints about the millions of dollars it would cost companies to make the switch.

A top U.S. securities regulator said on Tuesday, that the proposed transition toward international accounting rules in the United States should not reduce the amount of information available to investors, even if it requires companies to keep dual sets of books for years at their own expense.

“We would not want to reduce the amount of information that is available to U.S. investors,” John White, the director of the division of Corporation Finance for the U.S. Securities and Exchange Commission said on Tuesday in response to concerns from corporate finance executives about the cost of switching to International Financial Reporting Standards (IFRS).

“Today the U.S. investor gets three years of information,” White continued, saying that if companies transition by 2014, as proposed, they would likely have to report results in IFRS for the two previous years.

White’s comments at a Financial Executives International conference in New York stood in stark contrast to concerns expressed by executives at the conference on Tuesday.

"I don't think this is a particularly good time, given the economy to begin this massive ... move to IFRS," Talia Griep, vice president and controller at manufacturer Honeywell International Inc HON.N said on Monday. "It's just a tall order to ask for any group of executives."

To make the switch, Griep estimated her company would have to begin running parallel sets of accounting books, in U.S. Generally Accepted Accounting Principles and IFRS by January, 2012 -- a move that would require more training, technology and other costs for her accounting staff.

On Tuesday, the SEC’s White acknowledged many companies would prefer to run two sets of books “rather ... than go back and reconstruct,” their financials.

On Friday, the SEC released its formal proposal for a “roadmap” that would have U.S. companies filing financial results under IFRS by 2014. The release is open for public comment until Feb. 19.

Under the proposed roadmap, in industries where a significant majority of companies use IFRS, some U.S. companies would have the option to file financial results under international rules as soon as 2010.

According to the proposal, the SEC estimated that 34 out of 74 industry groups, or a minimum of 110 U.S. companies, would be eligible to file financial results under IFRS by 2010, according to the proposal. The SEC estimated the total cost of transitioning to IFRS for those 110 companies would be $3.5 billion, or about $31.8 million on average.

While the SEC said it would be unlikely that all 110 eligible companies would elect to file results in IFRS, General Motors Corp GM.N controller Nick Cyrus, said at the conference, that the cost would be prohibitive, especially since international and U.S. accounting rules have not fully converged

“There’s no first-mover advantage here ... resources are scarce,” Cyprus said. “I think there needs to be a lot more convergence between U.S. GAAP and IFRS before I lead,” the effort to switch accounting rules.

To account for pension costs or intangible assets, like research and development, some companies may even have to look back as far as 10 or 15 years, Arnie Hanish, executive director of finance and chief accounting officer at Eli Lilly and Co LLY.N & Co said at the conference.

Despite the cost, White said the SEC is eager to have some U.S. companies file in IFRS.

“I think we would be disappointed if we have no companies participate,” White said, noting early participation could help identify trouble spots ahead of time.

Some companies with many overseas rivals or subsidiaries may find their financial results are more comparable to their rivals if they file in IFRS. White said some companies had already expressed interest in filing early to the SEC’s chief accountant, Conrad Hewitt. (Reporting by Emily Chasan; Editing by Bernard Orr)