Staff at the Securities and Exchange Commission are holding fast on offering no timeline for an SEC determination on International Financial Reporting Standards, but one SEC expert offered detailed insights into considerations countries typically weigh as they decide on adoption, and countries usually adopt to achieve some larger economic objective.

Paul Beswick, acting chief accountant at the SEC, said at the national regulatory conference of the American Institute of Certified Public Accountants that the IFRS question is perhaps the most important accounting consideration the SEC has faced since the 1930s. He had nothing  further to say, however, on if, when, or whether the SEC will make a determination, especially now that Chairman Mary Schapiro has announced her plans to leave the SEC. “The staff is working to assure that the commission is properly informed,” he said. “Please stay tuned.”

The SEC staff presented its final report to the full commission in July without making any specific recommendation or providing a timeline for when it would make a recommendation. Jennifer Minke-Girard, senior associate chief accountant at the SEC, said the staff can't offer any timeline projections. "We've done the work we were asked to do," she said. "To the extent the commission has next steps for us, we will respond to those."

Without directly channeling any guidance she would offer to the full commission, Julie Erhardt, deputy chief accountant at the SEC, said where countries have made a switch to IFRS, it's been to achieve some economic objective bigger than just adopting new accounting standards. Erhardt said countries that have adopted IFRS are usually looking for some improvement in capital markets or the greater society that can only be achieved by adopting IFRS. She said countries typically focus on three major considerations as they think about adopting IFRS -- the “make vs. buy” decision, the implications for attracting increased foreign investment, and obstacles to gaining access to foreign capital.

In the make-or-buy decision, Erhardt said countries will assess whether they can make a significant improvement in their accounting standards by adopting the international rule book. Countries will consider, for example, whether the quality of financial statement information would improve, what kind of costs the country might incur in adopting IFRS, and whether the standard-setting process for IFRS is better than the home country's standard setting process.

As for foreign investment, countries will consider the extent to which they need to attract foreign investment to gain the capital necessary for its markets to function and grow. “Pricing of inbound capital is where accounting standards come into play,” she said. “If the cost of foreign capital is reduced under IFRS, that could be a motivator.” That might be a consideration if prospective investors are more familiar with IFRS than the country's national standards, she said. 

Erhardt said countries will also think about the “friction” that exists between its own market and foreign markets as they attempt to import and export capital across borders. Acknowledging necessary checks and balances in the processes meant to protect home country markets, Erhardt said those provisions nevertheless produce friction in trying to move capital across borders. If the friction caused by having differences in accounting standards is costly or intolerable, that might present another reason for a country to consider adopting IFRS.

Erhardt declined to apply those considerations, which she described as a "gross oversimplification" of the issues, directly to circumstances in the United States with her own insights on how it might guide an SEC decision. Instead, she encouraged preparers and auditors to give it some thought on their own to reach their own conclusions.