SEC seeking comments as schools, profession prepare for new rules
The Securities and Exchange Commission has published a roadmap for the change from the rules-based American Generally Accepted Accounting Principals, or GAAP, to the principles-based International Financial Reporting Standards, or IFRS, and has the document open for comment.
The comment period is scheduled to end Feb. 16, but as of now, many are asking the time to be extended to April 30.
“It sounds like there is a distinct possibility that that will happen,” said Sam Doolittle, West Coast IFRS leader for Deloitte & Touche LLP.
During her confirmation hearing, Mary Shapiro, the new head of the SEC, said in response to the question of her view of the roadmap that she didn’t want to move too quickly, indicating, said Mr. Doolittle, that this holdover may happen.
In 2011, the SEC will make the decision whether to adopt IFRS. The plan is for adoption in 2014. But the SEC would want three years of comparative information, meaning companies would have to begin to practice the IFRS as soon as 2012.
With the economy becoming increasingly global, pressure has been building for some time to move to a more universal statement system.
Once the European Union implemented the Euro, it began the switch to a more universal way of reporting on financial statements, moving away from all of the countries having their own GAAP.
The SEC is working to follow the trend.
In the U.S., the current standards are rules-based, Mr. Doolittle. said. That means there is an attempt to create
rules for every possible scenario, which comes out to be about 25,000 pages of regulations.
Now the SEC is working on moving away from the United States rules, overseen by the Financial Accounting Standards Board, and switching to the international standards.
In the United Kingdom, a group called the International Accounting Standards Board has come together to create guidelines for the accounting standards. The SEC was appointed as one of the members of the board to oversee the IASB. This is a principle-based way of accounting reporting, which has a guidebook of only 2,500 pages.
The main difference resides in the way accountants look at the statements. With the principles-based system, there is more room for interpretation.
When it comes to a switchover of this scale, the training that will be required of people both planning to become accountants and people who are already in the field can be daunting.
Elizabeth Capener, director of the undergraduate business program at Dominican University, said the Big 4 accounting firms have communicated to universities that starting this year they expect graduating accounting students to have at least some knowledge of IFRS.
One reason for this is that they are wanting new hires to be prepared when and if the changeover happens. Another reason is that so many of these companies are international or have international subsidiaries and recent graduates out on the job market need to know now what these guidelines are.