On October 24, 2007, the Securities, Insurance, and Investment Subcommittee of the U.S. Senate Committee on Banking, Housing and Urban Affairs held a hearing on "International Accounting Standards: Opportunities, Challenges, and Global Convergence Issues" in Washington, DC [see the hearing web page]. Here are some highlights of the testimony provided at that hearing:
Robert H. Herz, Chairman of the U.S. Financial Accounting Standards Board (FASB): "[W]e do not support permitting U.S. companies a choice between IFRS and U.S. GAAP for any extended period of time. Rather, we believe it would be preferable to move all U.S. public companies to an improved IFRS over a transition period of several years following the blueprint we are advocating be developed."
Charles E. Landes, Vice President, American Institute of Certified Public Accountants (AICPA): "I want to state as directly as possible that the AICPA supports the goal of a single set of high-quality, comprehensive accounting standards to be used by public companies in the preparation of transparent and comparable financial reports throughout the world. The debate or question should no longer be whether we move to convergence of high quality accounting standards, but how soon we can accomplish convergence. . . Is there still hard work to be done towards convergence? Yes. Will there be bumps in the road as we take this journey? Absolutely. But it is a journey that must be taken."
In summary: The FASB, the AICPA, and other providers of testimony expressed strong support for the movement of all public companies away from U.S GAAP to an improved versions of IFRS as the only acceptable set of standards to use in preparing financial statements. And all agreed that the transition process would work better if it was based on a well-conceived "blueprint," which has yet to be developed. But while the AICPA and SEC expressed strong support for the SEC's proposal to eliminate the U.S. GAAP reconciliation requirement for foreign private issuers using IFRSs and the SEC's Concept Release regarding giving U.S. issuers an option to prepare financial statements in accordance with IFRS, other hearing participants were generally either neutral or opposed to the SEC accepting IFRS-compliant filings as-is prior to the development of an improved version of IFRSs, with respect to which U.S. GAAP will either be converged or simply no longer relevant.
Commentary: Regardless of what the SEC does in the short-term, the long-term trend is unmistakable: U.S. public companies (and possibly privately-held companies as well) will eventually use a version of IFRSs that will be significantly different from either current IFRSs or current U.S. GAAP. And it is that yet-undefined set of standards that U.S. financial executives need to begin preparing themselves and their organizations for, knowing that both U.S. GAAP and IFRSs will undergo rapid, profound change along the way.
