In perhaps her strongest statement on the subject during her tenure at the Securities and Exchange Commission, soon-departing Chair Mary Jo White urged her successor to prioritize continued improvement and convergence of accounting standards globally.
The U.S. Financial Accounting Standards Board and the International Accounting Standards Board worked together formally for several years to improve and more closely align their respective rules in U.S. Generally Accepted Accounting Standards and International Financial Reporting Standards, especially standards on business combinations, fair value measurement, revenue recognition, financial instruments and leases.
The SEC stoked hopes of an eventual U.S. adoption of IFRS when it determined in 2007 that IFRS was comparable enough to U.S. GAAP that foreign private issuers could file their financial statements in the U.S. without providing a reconciliation to GAAP. After intensive study of IFRS and how it might work in the United States, however, the SEC took no further formal action to incorporate IFRS into the U.S. reporting regime.
After FASB and IASB wrapped up their priority convergence projects, FASB turned its attention toward improving GAAP for the sake of U.S. investors, and the prospect of a U.S. adoption of IFRS, even on some optional basis, went cold. White will depart her position with the change of presidential administrations, when Jay Clayton, currently a partner at law firm Sullivan & Cromwell, will assume the post.
In her parting missive, White said the SEC has a responsibility to investors and to capital markets to assure accounting standards produce reliable information. Some 500 companies report under IFRS in the United States, and investors rely on IFRS making international investing decisions. Even companies reporting under GAAP are heavily engaged with IFRS if they have overseas subsidiaries or are undertaking mergers or acquisitions with entities reporting under IFRS, she said.
White urged the next SEC chair to work closely with Chief Accountant Wesley Bricker to be an active member of the monitoring board of the IFRS Foundation and encourage FASB’s active membership in the IASB’s advisory forum. “And the IASB should be welcoming and responsive to those inputs,” she said.
FASB and IASB should continue their collaboration, “including further work on convergence,” she said. “While it is now clear that U.S. GAAP and IFRS will continue to coexist in our public capital markets for the foreseeable future, it is just as clear that the effort to enhance the respective standards and to reduce differences between them should continue,” White said. “The United States cannot afford to be myopic about this issue in light of the benefits of these efforts for all stakeholders.”