IASB Clash with SEC on Adoption of IFRS
IASB and SEC have once again clashed with each other after the SEC published its staff related report. SEC had recently released its staff report pertaining to the implementation of International Financial Reporting Standards. The report clearly stated that instead of following IFRS, United States should continue relying on accounting standards being followed nationally. The report also indicated that there are several flaws in the IFRS accounting system and that it failed to address several gaps. In addition to this, it also clarified that most of the companies in United States were not in favor of IFRS adoption. Michel Prada who is currently the chairman of the Trustees of IFRS Foundation stated he regretted the fact that a plan for adoption of IFRS was not included in the report.
This is not the first time that the International Accounting Standards Board has disagreed with SEC’s stance or views. Earlier in the month of July, IASB’s oversight body’s chairman had expressed dissatisfaction on US Securities and Exchange Commission’s lack of enthusiasm towards adoption of IFRS.
IASB stated that organizations in countries like Brazil, Russia, Canada, South Korea, European Union and other nations have already adopted International Financial Reporting Standards and it would expect United States to do the same. U.S. currently follows its own financial accounting standards that are popularly called the GAAP (Generally Accepted Accounting Principles).
But SEC’s staff released a paper related to the matter, which did not provide any clue regarding when the market regulators of US would adopt IFRS. Michel Prada had then mentioned that adoption of IFRS by US would benefit both the country and the stakeholders. Prada also mentioned that he was hopeful that SEC would resolve the uncertainty pertaining to the adoption of global financial accounting rules.
Aligning their existing financial accounting rules with International Financial Reporting Standards, will allow US investors and regulators to compare their business across different countries and tighten few of the weaknesses that came into picture during the financial crisis.
The FASB, responsible for setting US Generally Accepted Accounting Principles, has been coordinating with the International Accounting Standards Board for more than ten years now to eliminate the differences that exist between the accounting systems so that US adopts IFRS quickly.