By James Hamilton, J.D., LL.M.
Against the backdrop of the SEC proposal to eliminate the reconciliation of IFRS-driven financial statement to US GAAP, standard setters and regulators detailed the global implementation of ISFR at a recent conference of world standard setters. SEC Deputy Chief Accountant Julie Erhardt praised IFRS as affording investors in global markets an efficient compare way to compare investment opportunities.
That said, the SEC official noted that often a company's financial statements are likely to be prepared in accordance with IFRS as published by the IASB and/or a jurisdictional adaptation of IFRS. In these situations, an investor may not be sure what the distinction between the two means and how significant it is for a particular company. Indeed, in the foreign registrant filings the SEC has seen so far, she continued, there are varying ways that issuers have referred to their basis of presentation that utilize the term IFRS. For example, issuers have referred to IFRS as approved by the IASB and IFRS as adopted in Jurisdiction X.
Paul Cherry, chair of the Canadian Accounting Standards Board said that the target date for ISFR is January 1, 2011; and that Canadian GAAP is the same as ISFR. He pledged that there would be no carve-out mechanism in the adoption of ISFR, but that unique Canadian circumstances would be considered. The chair also questioned whether more industry-specific standards are needed, specifically mentioning the oil and gas industry. In addition, there are some troublesome areas, such as securitizations, special purpose entities, and the impairment of long-lived assets.
Ikuo Nishikawa, chair of the Japanese Accounting Standards Board, said that the convergence of IFRS with Japanese GAAP is proceeding apace, with a goal of completing short-term convergence projects by 2008 and other convergence topics by mid-2011. The short-term convergence projects are the major ones, the chair noted, including asset retirement obligations, disclosure of fair values, business combinations, and intangible assets. The 2011 target date does include segment reporting.
Korean GAAP is now almost equivalent to IFRS, said Hyoik Lee, chair of the Korean Accounting Standards Board, but Korea is still viewed as non-compliant with IFRS. The chair believes that the adoption of IFRS will enhance accounting transparency in Korea. He noted that Korea will phase in IFRS, rather than using a ``big bang approach.’’ Any company will be allowed to adopt IFRS starting in 2009, with all listed companies required to adopt by 2011. Korea has over 30 companies listed on EU markets, he noted, which is third behind the US and India.
Speaking of the Australian experience, which began in 2005, David Boymal, chair of the Australian Accounting Standards Board, said that most large companies were well prepared, but small companies and small accountants were not prepared. A big surprise was the extent of additional disclosures. In addition, while the transition was a great technical success, many CFOs still do not think that it was worth the effort.