In response to an Aug. 27 announcement, industry representatives are expressing support for the concept of a ‘roadmap’ for creating a single set of international accounting standards to be released by the U.S. Securities and Exchange Commission.
However, they say they will wait for details of the ‘roadmap’ before offering detailed comment.
In a statement, the SEC said it had voted to publish for public comment a roadmap that could lead to the use of International Financial Reporting Standards by companies beginning in 2014. The SEC said it would make a final decision on the matter by 2011.
SEC Chairman Christopher Cox noted the concept offers the possibility for “a true lingua franca for accounting.”
Over 100 countries worldwide require IFRS and 85 of those countries require it for their domestic companies, he added.
In a statement, the American Council of Life Insurers, Washington, said it looks forward to seeing the actual details of the ‘roadmap.’ The statement noted that statutory accounting, which ensures solvency for insurance companies, would not be directly affected by the SEC’s proposal and that the proposal establishing International Financial Reporting Standards would affect GAAP accounting. Further, according to the ACLI, the project is still in its early stages, so the impact on the industry is difficult to determine.
But, the ACLI continued, it welcomes a strong, global set of accounting standards for public corporations.
Doug Barnert, executive director of the Group of North American Insurance Enterprises, New York, says GNAIE supports “a single, robust, high quality set of accounting standards.” However, he adds, there are still a lot of ‘ifs’ surrounding the project. For instance, he says there are a lot of potential problems because a change to US GAAP could affect statutory accounting. Even if statutory accounting remains, the impact on things such as the NAIC’s Codification requirements is uncertain, he adds.
Lisa Filomia-Aktas, a partner with Ernst & Young, New York, says the dates under discussion for implementation are 2014 for large companies, 2015 for mid-sized companies and 2016 for smaller companies. But, she continues, for those filing in 2014, there would have to be comparable IFRS filings for 2012 and 2013.
This will require examining assets and liabilities as well as what is on and what is off the balance sheet, which will require a lot of work to convert to IFRS, she notes. Consequently, companies that are among the first to adopt these standards will need to begin preparing for the proposal very soon, Filomia-Aktas says.
It could take 2-3 years to put such changes in place depending on the size of the entity, how decentralized it is and how many business lines it has, she explains. Changes will have to be made throughout an organization and not just in the accounting area, she continues. It will affect things such as debt covenants, say Filomia-Aktas.
This is a matter of “when it’s coming,” not “if,” she asserts.