More On Legal & Compliancefrom The Advisor's Professional Library
- The Custody Rule and its Ramifications When an RIA takes custody of a clients funds or securities, risk to that individual increases dramatically. Rule 206(4)-2 under the Investment Advisers Act (better known as the Custody Rule), was passed to protect clients from unscrupulous investors.
- Books and Records Rule Thorough and complete books and records enable RIAs to demonstrate that they have fulfilled their fiduciary obligations to clients and complied with applicable rules and regulations.
The Securities and Exchange Commission voted August 27 to publish for public comment a proposed Roadmap that could lead to the use of International Financial Reporting Standards (IFRS) by U.S. public companies beginning in 2014.
Currently, U.S. companies use U.S. Generally Accepted Accounting Principles (U.S. GAAP). The Commission said it would make a decision in 2011 on whether adoption of IFRS is in the public interest and would benefit investors. According to the SEC, the proposed multi-year plan sets out several milestones that, if achieved, could lead to the use of IFRS by U.S. issuers in their filings with the Commission.
"An international language of disclosure and transparency is a goal worth pursuing on behalf of investors who seek comparable financial information to make well-informed investment decisions," said SEC Chairman Christopher Cox, in releasing the proposal. "The increasing worldwide acceptance of financial reporting using IFRS, and U.S. investors' increasing ownership of securities issued by foreign companies that report financial information using IFRS, have led the Commission to propose this cautious and careful plan. Clearly setting out the SEC's direction well in advance, as well as the conditions that must be met, will help fulfill our mission of protecting investors and facilitating capital formation."
Barry Melancon, president and CEO of the American Institute of Certified Public Accountants (AICPA), said in a statement that the AICPA "supports one set of high-quality global accounting standards for public companies." The capital markets, he said, "ultimately will insist on IFRS for public companies. Today's action by the SEC continues a robust and thoughtful debate that is critical as the transition occurs."
Melancon said the AICPA believes what's needed for a smooth transition is ongoing collaboration between the Financial Accounting Standards Board (FASB) and the International Accounting Standards Board to achieve convergence, and preparation for the shift to IFRS-based reporting using eXtensible Business Reporting Language (XBRL).