At the same time at least four corners have been asking for a deferral of the effective date of the broad-based new Revenue Recognition standard issued by the Financial Accounting Standards Board and International Accounting Standards Board in May.
Will There Be a Rev Rec Deferral?
Following on earlier reports (see: FASB, IASB Considering Revenue Recognition Deferral) FASB Board Member Larry Smith shared some of his views at a Public Company Accounting Oversight Board (PCAOB) advisory group meeting last week. The gathering was a meeting of the PCAOB’s Standing Advisory Group, of which the FASB (and SEC) serves as an Observer. My own reading of his remarks, shown below, is that he would be 'more likely than not' to vote for a deferral of the standard.
Noting that FASB is considering issues of its constituents' preparedness for moving to the requirements of the new standard, Smith said he was "hopeful that sometime toward the end of March or so, we'll be in a position to take on the issue as to whether a deferral is required." He added, "I have seen recent press reports that the new Chief Accountant of the SEC has effectively put a placeholder in terms of his view, and quite frankly - and again, these are my views - to the extent that we take on a number of issues that have been raised with the TRG, and would want to deliberate those issues, there's a certain amount of time that will take place, and I would think that may influence our thinking as to whether a deferral is necessary or not."
For one such "press report" on the SEC Chief Accountant's remarks relating to consideration of a deferral of the effective date of the new Rev Rec standard, see our earlier report, SEC Chief Accountant on IFRS, Rev Rec and Audit Committees.
SEC Considering IFRS 'Alternatives' for U.S. Companies
At last week’s FEI Current Financial Reporting Issues conference (see link above) SEC Chief Accountant Jim Schnurr indicated some kind of movement would be seen in the next few months on the question of the SEC’s views on what ‘alternatives’ should (or should not) be available to U.S. public companies with respect to the use of IFRS in their SEC filings.
In listening to the Chief Accountants remarks, I would note there are various alternatives out there, and the Chief Accountant definitely used the word “alternatives”; the importance of that term, in my view, is that the decision may not necessarily be a binary "must use IFRS" / "must not use IFRS" decision - but could contain an "IFRS option."
And while the FASB recently responded to concerns voiced by Sen. Carl Levin on the impact of converging with IFRS with respect to the quality of U.S. GAAP, although the SEC was not explicitly asked to respond to Sen. Levin’s letter, I believe the Commission will need to be mindful of the concerns voiced in that letter and a response may be embedded in any future statement/Concept Release or rule proposal that may be forthcoming.
In separate speeches in the past couple of weeks, two high-ranking IASB and International Financial Reporting Standards Foundation officials seemed upbeat, about the future prospects for the consideration of IFRS in the U.S. and the maturity of IFRS, respectively. (See: IFRS Officials Sound More Hopeful About U.S. Decision, by Mike Cohn in AccountingToday, and IFRS 'Maturing' as 10th Birthday Approaches in FEI Daily.)
One point that I took note of in IASB Vice Chairman Ian Macintosh's speech about the maturing of IFRS, which I suspect the SEC will take under consideration as well, was Macintosh's remark that, "We have formalised our working arrangements with IOSCO, the international network of securities regulators, through the creation of a Statement of Protocols. That statement describes the steps that they and we will undertake to enhance consistency in the implementation of IFRS."
The Statement of Protocols for Cooperation on International Financial Reporting Standards, issued by IOSCO and the IFRS Foundation in Sept., 2013 notes that, "IOSCO," of which the SEC is a member, "has long supported the work of the [IFRS] Foundation through its standard-setting body, the International Accounting Standards Board (IASB), in their efforts to develop IFRSs as a high-quality set of accounting standards that can be applied globally."
Observing that the IFRS Monitoring Board retains certain responsibilities, the IOSCO Protocols Statement notes that it establishes separate responsibilities as relates to IOSCO's review of and input relating to the (1) development of IFRS, and (2) implementation of IFRS.
The Statement of Protocols, published in Sept. 2013, concludes by calling for a review to be undertaken, "in approximately two years," at which time "representatives of the IOSCO Board and of the [IFRS] Foundation will meet to review how these protocols have contributed to the goals they have in mind, and to determine whether there are ways to improve them."
In response to a question I sent to both the IFRS Foundation and to IOSCO, as to the intermediary status of any such review of the IOSCO - IFRS Foundation protocols, I received the following response from Yael Almog, Executive Director of the IFRS Foundation, "While we have always worked in close cooperation with IOSCO because both organisations share a common objective to protect investors, the joint Statement of Protocols has provided a framework for both organisations to deepen our cooperation. This is particularly important to both parties as we work together on the development of IFRS and to further enhance consistency in the implementation of IFRS around the world. IOSCO continues to provide high quality input to our work, and in turn, representatives from the IFRS Foundation and the IASB have participated in related activities of IOSCO. As planned, a review of the Statement of Protocols is expected to be undertaken during 2015.”
And at press time, a response came in on behalf of IOSCO. This response, much like that of the IFRS Foundation, did not try to envision the outcome of the 2015 review of the Statement of Protocols, and did not venture any intermediary opinion as to the development of, or (consistent) implementation of IFRS. The statement from IOSCO did say, “The Statement of Protocols builds on more than a decade of cooperation between IOSCO and the IFRS Foundation. I have been pleased to see the natural progression of this working relationship during the past year, and I look forward to the continued evolution of our work going forward.” The source of this statement: SEC Deputy Chief Accountant Julie Erhardt, chair of IOSCO Committee 1 on Issuer Accounting, Auditing and Disclosure.