I don’t know about you but 2012 for me is flying by. It was supposed to be the year the US Securities and Exchange Commission (SEC) gave its decision on whether or not its financial markets would move away from US GAAP and adopt IFRS. But it seems it is unlikely to happen this year.
Earlier this month, the SEC staff issued their report on the work plan towards global accounting standards but disappointingly it gave no opinion on whether or not the country should adopt IFRS. It only examined the argument for and against different forms of adoption if it were to (Turn to page 03 for the full news report).
This feels like déjà vu, which essentially means when you have an overwhelming sense of familiarity with something. We have been here before – the big build up towards a response from the US and then the let down when nothing comes or what does come is in the form of a delay.
I don’t mean to trivialise how big of a decision moving away from a quality set of rules-based accounting standards (US GAAP) towards a quality set of international principles-based accounting standards (IFRS) is but the hesitance of the US decision does have an impact on the rest of the world.
Some of the world’s large economies, such as Japan, and some developing countries have delayed full adoption or convergence in order to wait and see what the US does. Therefore this delay is hampering the overall push towards one set of high quality global accounting standards, which has continued support from the G20 leaders.
In recent days, some in the accounting profession have argued this will not slow the goal down but how can it not? Others are calling for the US to allow public companies early adoption, which I think makes sense and could also serve as a sort of pilot programme into wider adoption in the country.
Questioning the US seat
The US decision to drag its heels over IFRS could lead to it being sidelined by the International Accounting Standards Board.
This could also derail the movement for a single set of high quality global accounting standards and push the US further away from global accounting than before.
If the US abandons IFRS, multinationals might consider pulling out of US capital markets in favour of listing in markets that do not require their businesses to be accounted for in two different ways – IFRS and US GAAP.
Perhaps the biggest loser would be investors and users of financial statements. The aim of a single set of accounting standards is to make it easier for report users to compare figures across the world.
If the US wants to join the party it should make its intentions clear rather than vague announcements that it is still unsure.
Patience across the Atlantic is wearing thin.
It’s time for the SEC to take a stand.