The staff of the Securities and Exchange Commission is seeking public comment on dozens of questions as part of its Work Plan on the possible adoption of International Financial Reporting Standards for U.S. issuers.
The agency issued the requests for comment in two separate releases dated Aug. 12. Comments on both are due 60 days following publication in the
Federal Register.
One release seeks comment on the impact adopting IFRS would have on issuers' compliance with contractual arrangements that require the use of U.S. Generally Accepted Accounting Principles, compliance with corporate governance requirements, and the application of certain legal standards tied to amounts determined for financial reporting purposes.
The other asks about the impact on U.S. investors' current knowledge of IFRS, their preparedness for incorporation of IFRS into the financial reporting system for U.S. issuers; the ways investors educate themselves on changes in accounting standards, as well as the extent of, logistics for, and estimated time needed to make changes to improve investor understanding of IFRS and the related education process to ensure investors have a sufficient understanding of IFRS prior to potential incorporation.
As part of a
statement adopted by the Commission in February reaffirming its support of convergence and global accounting standards, the SEC directed the staff to develop and execute a work plan aimed at hashing out several major issues identified during the comment period on its 2008 proposed roadmap that will impact its decision on whether and how to allow U.S. companies IFRS.
The SEC is
supposed to decide in 2011 whether or not to allow domestic companies to make the move to IFRS. If it does move forward, the agency said that adoption wouldn't occur until at least 2015.
Details of whether and how that move would occur are yet to be decided. The SEC's
2008 proposed roadmap would've mandated adoption on a phased-in schedule. That plan had also contemplated letting some companies early adopt. In its February statement, the SEC dropped the early use option, but said it may consider the issue later.
The SEC is supposed to begin issuing public progress reports on the work plan by October.
Among other things, the releases ask about the extent and ways in which incorporating IFRS into the financial reporting system for U.S. issuers would affect the application, interpretation, or enforcement of contractual commercial arrangements, such as financing agreements, trust indentures, merger agreements, executive employment agreements, stock incentive plans, leases, franchise agreements, royalty agreements, and preferred stock designations.
Other questions ask what other types of contractual commercial arrangements would likely be affected, and how; and whether, for existing arrangements, the incorporation of IFRS would be treated differently than a change in existing financial reporting standards under U.S. GAAP would be treated today, and if so, how.
Some of the questions seek comment on the extent to which a move to IFRS would have any potential adverse effects on issuers' compliance with corporate governance and related disclosure requirements
The agency also asks how the set of accounting standards used by a company for financial reporting are significant to an investor's decision to invest in that company; how the current differences between U.S. GAAP and IFRS would affect an investor's use of the information reported in the financial statements; how completion of the convergence projects would affect investors' use of those financial statements, and how investors think incorporation of IFRS would affect comparability among different issuers' financial statements.
The SEC also seeks comment on whether providing for a transition or phase-in period for compliance would mitigate or avoid any of the potential effects of incorporating IFRS, and how long a transition or phase-in period would be necessary. The releases also invite comment on whether the manner in which IFRS incorporation is implemented would have any affect on the answers to any of the questions.