SEC Dispels Myths About Its Stance on IFRS
The Security and Exchange Commission (SEC) is speaking out in response to a number of myths that are circulating regarding its lack of commitment to a single set of high quality accounting standards.
In November 2008, the SEC released the long awaited International Financial Reporting Standards (IFRS) Roadmap, which proposed a staged transition to the implementation of the global accounting standards. However, the financial crisis quickly diverted the SEC’s attention, delaying substantive action.
Addressing the topic again in February 2010, the SEC indicated it now expects a final decision in 2011. Since its release, a number of concerns have also surfaced. Most notably, the SEC has been accused of being somewhat less than enthusiastic about the transition to IFRS.
In a speech to the CFA Institute’s Annual Conference in May, SEC Chairman Mary Schapiro addressed four of what she considers to be the most troublesome myths and why they are not factually based. They are as follows:
- Myth #1: The SEC’s commitment to global accounting standards is not as strong as it should be: Schapiro points to the Commission Statement in Support of Convergence and Global Accounting Standards, released in February, which states that the SEC believes that a single set of high-quality globally accepting accounting standards will benefit U.S investors. She notes that this goal is consistent with the SEC’s mission of protecting investors, maintaining fair, orderly and efficient markets, and facilitating capital formation. Further, the SEC continues to encourage the convergence of U.S. GAAP and IFRS.
- Myth #2: The U.S. may be committed, but it’s dragging its feet regarding the adoption of IFRS: While the convergence process is critical to bringing IFRS to the U.S. market, Schapiro says that the SEC believes this process will only be beneficial to investors if it takes into account due process of the standard setting bodies it will serve. And while this process is time-consuming, it is completely necessary in providing the highest quality improvements to accounting standards. “The fact is we are moving forward. We are executing on a comprehensive work plan, dedicating significant resources to it and providing periodic progress reports on it,” said Schapiro.
- Myth #3: The United States is fixated on process: The SEC -- and the United States as a whole -- may seem fixated on process, but this is only because it understands the important role it plays in reaching a successful conclusion, says Shapiro. Shortcuts undermine goals and risk compromising the achievement of high quality standards, while a proven process mitigates these risks. Though the process of agreeing on standards is complicated by procedural safeguards and governing bodies, Schapiro states that it is critical to achieving the best possible results.
- Myth #4: America is protecting its parochial interests: The SEC is responsible for protecting the global interest of all investors participating in their market, whether they are American or not, said Schapiro. “The global economy is too intertwined and too interdependent to tolerate parochial interests. Our goal is to ensure a neutral process that results in rules that give capital market participants everywhere access to information on the financial performance and position of companies, so that they are able to make informed economic decisions,” she said.
In conclusion, Shapiro noted that “creating a system of high-quality, globally accepted accounting standard that benefits American investors and investors around the world is a detailed and challenging task. But it is a task we have been eager to embrace, and to which we remain fully committed.”
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