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Sec Accept Ifrs? Essay

1356 words - 6 pages

The Security and Exchange Commission’s debate over whether to accept the International Financial Reporting Standards as an alternative to the United States’ Generally Accepted Accounting Principles remains undecided. In February 2010, the SEC generated an IFRS Work Plan in order to promote the development of a single set of high-quality, globally accepted accounting standards. The Work Plan consists of six key areas. The first of these focus on the ability of IFRS to be comprehended, to be consistent, and to be enforced; it is referred to as “sufficient development and application of IFRS for the U.S. domestic reporting system.” The second, “the independence of standard setting for the ...view middle of the document...

S. issuers an option to adopt IFRS as issued by the International Accounting Standards Board” ( In a recent AICPA IFRS readiness survey, seventy nine percent of CPAs have a basic knowledge of IFRS, meaning an adjustment would not be as difficult as if no knowledge existed (
Given the efforts thus far from SEC staff, it is evident that the SEC will eventually accept IFRS. The SEC released Commission Statement in Support of Convergence and Global Accounting Standards, stating the continuing effort in support of a single set of accounting standards. The Final Staff Report on the Work Plan was released on July 13, 2012, but did not address any final conclusion on incorporating IFRS in the U.S (
In a study conducted by PwC in 2011, 50% of respondents claimed they “already report on IFRS (e.g., non-US based companies or subsidiaries of non-US companies), are currently using IFRS for non-US subsidiaries, or are in the process of transitioning certain subsidiaries to IFRS” ( The SEC is pressured to act soon as many companies currently are facing transition issues as a result of IFRS adoption in other countries throughout the world, and through “merger and acquisition activity, business dealings with customers and vendors reporting under IFRS, and subsidiaries with public reporting requirements” ( Already about one hundred twenty nations worldwide primarily use IFRS and to compete with competitors internationally, it is becoming more and more necessary to use IFRS for easier comparisons ( The use of IFRS may be advantageous to companies wishing to raise foreign capital or to start subsidiaries abroad. Others argue that the U.S. GAAP should be maintained due to its guidance to standard setters and rule-based nature (McGraw Hill).
IFRS does seem to do a better job than U.S. GAAP in terms of some inconsistencies. Under IFRS for recording depreciation, “separate significant components of property, plant, and equipment with different economic lives” must be recorded and depreciated separately. This guidance requires a review of “residual values and useful lives at each balance sheet date” ( U.S. GAAP, on the other hand, allows for a more aggregated analysis of depreciation. The component approach, used by IFRS, allows for more visibility and insight into individual property, plant, and equipment components. IFRS also may present expenses “based on their nature rather than their function” within the entity ( Further disclosures are used to discuss the function of the expense, as this is necessary for predicting future cash flows. In this way, more information is displayed under IFRS for expenses—they are expressed by nature, but explained further by function. The income statement under GAAP may be either single-step or multiple-step, but IFRS requires single-step. This may not necessarily be better than GAAP because it includes irregular or...

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