FAF suggests changes to ‘condorsment’

The Financial Accounting Federation (FAF)
trustees has broadly backed the SEC’s ‘condorsment’ model but
believes US standards should be comparable rather than identical to
IFRS and FASB should have a stronger standard-setting role than
what was outlined in the SEC’s consultation.

The amendments on the incorporation of IFRS
into the US financial reporting system, outlined in a comment
letter by FAF chairman John Brennan, is aimed at providing greater
protection to investors and autonomy to US accounting
authorities.

The FAF is believed to wield substantial
influence and its recommendations could shape the final model of
IFRS incorporation.

A fundamental difference is the FAF believes
US standards should be comparable, if not identical to IFRS in the
foreseeable future. Under the SEC’s condorsement model, IFRS should
in incorporated into US GAAP during a transition period of five to
seven years.

If this recommendation is adopted it could
lead to two sets of similar accounting rules rather than one set of
global standards, which has always been the stated aim of the
IFRS.

The FAF wants global standards to be
incorporated into US GAAP if they improve the quality of accounting
or the comparability of financial statements. This falls short of
the SEC’s proposal which only allows FASB interference in “unusual
circumstances”.

The FAF’s recommendations also aim to preserve
the role of FASB and the authority of the SEC in the
standard-setting process while providing FASB the ability to
preserve some exceptions for US companies during transition.

The FAF wants FASB to play a more active role
in global standard-setting. Under the condorsement, FASB would
‘participate’ in the development of standards but the FAF wants
FASB to be a principal body responsible for developing new
accounting rules or modifying existing standards under US GAAP.

The FAF recommends FASB and the SEC retain
sovereign authority in financial reporting standard-setting for the
US capital markets.

The SEC’s consultation on the ‘condorsment’
model was launched in May 2011.