US market participants are divided over
whether to have a phased approach or single-date transition towards
reporting under IFRS, according to feedback to an SEC
There are also mixed views about whether IFRSs
should be applied prospectively or retrospectively but unanimous
calls for the SEC to determine a timeline this year.
The US Securities and Exchange Commission is
seeking feedback on how and when IFRS transition should take place
in response to the staff paper Exploring a Possible Method of
Incorporation. The US is the last major economy that has
failed to make a concrete decision on IFRS although it is widely
expected the SEC will announce a transition timeline wither this
year or in 2012.
According to Deloitte, more than 140
preparers, users and other market participants have already cast
their views on IFRS transition models
Respondents largely supported having a single
set of high-quality global standards and a framework that combines
elements of convergence and endorsement for incorporating IFRS into
the US financial reporting system, also known as the ‘codorsement’
Smaller filers favour phased approach
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A significant number of respondents, mostly
US-based companies and smaller private entities, called for a
phased transition of five to seven years, suggesting this would
reduce costs and allow more time for IFRS education.
Larger public companies and multinationals
supported a single-date approach, arguing the interrelationships
between various standards means they should be implemented
concurrently while prolonging implementation efforts could affect
the comparability of financial reports.
Preparers and auditors largely encouraged the
SEC to allow an option to adopt IFRSs voluntarily during the
To minimise the impact of transition, most
preparers suggested the incorporation of IFRS into US GAAP be
prospectively applied, rather than retrospectively, to minimise the
cost burden on preparers. Concerns were raised over whether
applying IFRS retrospectively combined with the staggered
incorporation of IFRS into US GAAP would lead to excessive
Users of financial statements indicated a
preference for retrospective application because prospective
application affects the comparison of financial statements over
time. Auditors believe more cost benefit analysis should take place
before a decision on retrospective application is made.
Most respondents would like to se the US
Financial Accounting Standards Board retain a strong role in global
standard-setting to protect US interests.