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What Will the SEC's Next Step Be?
In November 2008, the SEC published "Roadmap for the Potential Use of Financial Statements Prepared in Accordance with International Financial Reporting Standards by U.S. Issuers," which delineated certain milestones it believed need to be achieved before it decides whether to require or permit U.S.-domiciled public corporations to adopt International Financial Reporting Standards (IFRS) (www.sec.gov/rules/ proposed/2008/33-8982.pdf). The SEC also listed 14 specific questions and stated that its decision would be based, in part, on the feedback it received. More than 240 comment letters were published on the SEC website in response to the road map (www.sec.gov/comments/s7-27-08/s72708.shtml). Comments ranged widely, from support to opposition, and were received from multinational corporations, preparers (both private and public), investors, auditing firms (large and small), international bodies, trade associations, accounting organizations, academics, and students. The purpose of this article is to organize, analyze, and summarize these comment letters, then to present recent developments and put forth predictions about the SEC's eventual decision regarding IFRS.
Convergence: A Brief History
The convergence of U.S. GAAP to IFRS is a relatively recent phenomenon. Although FASB and the predecessor to the International Accounting Standards Board (IASB) were both formed in 1973, talk of convergence only began in earnest at the turn of the 21st century. There are several reasons for this delay, as well as for the current upsurge in convergence activity. For one, FASB is simply the most recent of three U.S. standards-setting bodies that date back to the mid-1930s; thus in the United States, there was a comprehensive set of accounting standards in place long before 1973. The International Accounting Standards Committee (IASC) was initially formed in 1973 as a voluntary organization, had a very limited budget, and was composed of board members who were not required to sever ties with their employers. As such, the IASC was widely criticized, especially from some in the United States, as lacking the autonomy, funding, and expertise to create a set of high-quality standards comparable to U.S. GAAP. Over the 10 years that have passed since the IASB succeeded the IASC, however, the board has obtained more stable financial support, been endorsed by the European Union, and produced a more comprehensive and consistent set of accounting standards, many...