Recent statements and actions by the SEC suggest that it may revive its consideration of whether U.S. companies should be required to prepare financial statements in accordance with International Financial Reporting Standards (IFRS). In its draft five-year strategic plan, published on February 3, the SEC stated that “[d]ue to the increasingly global nature of the capital markets, the agency will work to promote higher quality financial reporting worldwide and will consider, among other things, whether a single set of high-quality global accounting standards is achievable.” While the strategic plan did not specifically mention IFRS, the SEC has previously stated that it considers IFRS to be a set of high-quality global accounting standards.
SEC Chair Mary Jo White recently issued a public statement that also suggests that IFRS may be back on the agenda for the SEC. She expressed support for the Financial Accounting Foundation’s decision to make a nonrecurring contribution of up to $3 million to the IFRS Foundation to support the completion of IFRS convergence projects. This decision was made in consultation with senior SEC officials and announced on January 28. The convergence projects involve the accounting for revenue recognition, leasing, financial instruments, and insurance. The SEC’s approval of the contribution shows its commitment to the convergence of U.S. GAAP and IFRS. Perhaps the SEC will now address its staff’s July 2012 work plan, which evaluated factors relevant to a decision whether U.S. issuers should be required to use IFRS in SEC filings.
SEC attention to IFRS now would make sense, given the increase in the use of IFRS around the world. In December 2013, the IFRS Foundation made available information it had developed about the application of IFRS in 122 jurisdictions. The study reports that 101 jurisdictions (83%) require compliance with IFRS in the preparation of financial statements of all or most domestic listed companies and financial institutions. Of the 21 jurisdictions that do not require compliance, 10 permit it; two require it for financial statements of financial institutions; two are in the process of adopting IFRS in full; and seven, including the United States, use national or regional accounting standards. The study found that jurisdictions made a limited number of modifications to IFRS and that, generally, such modifications are intended to be temporary steps in the jurisdictions’ plans to adopt IFRS.