State Board Report
Although that states’ CPAs are already using International Financial Reporting Standards (IFRS) for the US subsidiaries of foreign companies, Strategic Initiatives Committee Chair Gaylen Hansen still told the 2009 Regional Meetings that he believes the Securities and Exchange Commission’s “Roadmap” to the adoption of IFRS is “at a bit of a dead end.” He summarized the many comment letters received by the SEC about the Roadmap and concluded that most responders were unhappy with the timing for implementation. The letters also mentioned the cost of adoption, the governance of the International Accounting Standards Board, the quality of the IFRS and the need to maintain a convergence plan.
“Last year, I thought IFRS was one of the most significant issues we were facing. With the market meltdown, it has taken a bit of a back seat,” Mr. Hansen observed. “I don’t think IFRS is ready for prime time – and I don’t think that because of its internal structural issues it will ever be,” he stated. “We’re told that, if we do not adopt IFRS, we will be left behind. I think we have to stop apologizing for US GAAP: I think it is the gold standard.”
At breakout sessions on international standards, NASBA Vice Chair Billy Atkinson (TX), Past Chair Sam Cotterell (IA) and Legal Counsel Noel Allen took up the questions of board members. Mr. Allen pointed out that IFRS is already acknowledged in the United States, with Colorado expressly referencing it in its definition of accepted accounting principles, Connecticut mentioning it in experience and New York in the scope of what subjects licensees to discipline. Boards need to consider, if they do not mention IFRS in their rules, they may be leaving out a whole area that is beyond their jurisdiction. There is a Constitutional issue of the need to give licensees notice of what rules they must follow, he noted.
Statutory filings in Europe are being done using IFRS, Mr. Atkinson pointed out. He observed: “IFRS is a form of GAAP and the market is going to move on it whether the State Boards want it or not.” He added, “We have different jurisdictional issues and need to vet standards to make sure they meet our public expectations, and to have an independent body doing that.” There is a need for states to be advised on good legal standards, he said, and he anticipates a NASBA committee will be working on those.
“We have to continue convergence rather than ceding US GAAP to international standards,” Mr. Cotterell stated. He noted that with IFRS it will be necessary to provide more disclosure about the basis for professional judgment. More disclosure is the price to be paid for IFRS, he observed, and he was not convinced that corporations would be eager to do that.
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