Volume 18, No. 4

 

The SEC's IFRS Roadmap: Best Not Followed?  In late November, the SEC released its long-anticipated “roadmap” proposal for bringing the United States financial reporting under the umbrella of International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board. If you accept the premise that IFRS is the financial reporting road the whole world is traveling upon, then old-fashioned U.S. GAAP is the road less traveled.

Maybe Frost had it right. Investors are better off taking the road less traveled; it could make all the difference in the world to them, if this current proposal is the only alternative. That’s not because the standards embodied in the IFRS are inherently unsound. It’s simply because the proposed plan for conversion to IFRS from GAAP is an idea that is ahead of its time. When the milestones outlined in the proposal have been completely achieved, then the conversion might really benefit investors. The proposed timetable is hardly credible, however.

Billed as a single proposal, the “Roadmap document” really contains two proposals: one allowing firms to convert to IFRS early, and a second proposal describing how the transition will take place assuming all the milestones have been accomplished. Investors who don’t plan on retiring in the next five years - and there aren’t many these days - and who also plan on using financial statements should pay attention to this proposal’s implications for them.

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