To be in compliance with the Securities & Exchange Commission when it switches from the United States Generally Accepted Accounting Principles to the International Financial Reporting Standards, accounting firms are continuing to train their employees in international standards.
Because there are so many things to learn, compliance is going to be the biggest issue, said Kenneth Dansie, partner with Burr Pilger Mayer in Santa Rosa. However, he said, “In Europe they switched and it has not been too much of a problem.”
In 2011, the SEC will make the decision whether to adopt international standards, which is widely expected. The plan is for the changeover to take place in 2014. But the SEC says it wants three years of comparative information, meaning companies would have to begin to practice the standards 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.
Mr. Dansie said firms are starting to have workshops for their accountants.
The United States Supreme Court has agreed to hear a case challenging the constitutionality of Sarbanes Oxley legislation and the way board members are picked to sit on the Public Company Accounting Oversight Board.
Under the Sarbanes-Oxley Act, the Securities and Exchange Commission appoints members to the board after conversations with the chairman of the Board of Governors of the Federal Reserve System and the Secretary of the Treasury.
According to the act, two of the five board members of the board must be or have been certified public accountants. Additionally, members must serve full-time and their salaries must be equal to those of the chairman and members of the Financial Accounting Standards Board.
Currently, the president and the Senate have no say in who is on the oversight board for the accounting board, which the Competitive Enterprise Institute and the Free Enterprise Fund, the entities that brought this case to the Supreme Court, find fault with.
Chairman Mark Olsen and the other members, Daniel Goelzer, Bill Gradison, Steven Harris and Charles Neimeier, were appointed by the SEC.
Although Sarbanes-Oxley has had many detractors, it has a role to play, experts said.
“There is a case to be made that these enhanced government controls actually benefit private companies,” said Mike Knowles, partner in charge of the Frank Rimerman & Company LLP Services to Businesses division.
If Sarbanes Oxley were to change, he said, “in the short term it would allow public companies to save money, but in the long term it will erode the credibility of financial information.”
He said when companies first started complying with Sarbanes-Oxley in 2003 it was pretty surprising how rudimentary it was. It was cumbersome and expensive, he said. But since then, the cost of complying has dropped.