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Regulatory Agenda Will Turn to IFRS

May 22, 2014

The SEC is ready to revive its debate about what to do with IFRS for the U.S. financial markets, and Chair Mary Jo White called the international standards “a priority.” With the agency completing some of the work Congress ordered it to do in the Dodd-Frank Act and the JOBS Act, regulators have more time to consider how IFRS might work for U.S. investors.

SEC Chair Mary Jo White plans to reopen the agency’s dormant debate about what to do with IFRS for the U.S. financial markets.

“Today, over 500 companies representing trillions of dollars in aggregate market capitalization report to us under IFRS with no reconciliation. And the SEC staff enforces those standards. By any measure, we have thus demonstrated a major commitment to the use of IFRS in our markets,” White said in a speech before the Financial Accounting Foundation (FAF) in Washington on May 20, 2014. “But, the question remains—what about domestic issuers?”

The FAF is the parent organization of the FASB and GASB.

In recent years, the SEC has been writing rules mandated under the Dodd-Frank Act and the JOBS Act, and completing requirements handed down from Congress has taken up most of the regulatory agency’s time. The agency’s last formal statement on IFRS came in July 2012 in the Final Staff Report: Work Plan for the Consideration of Incorporating International Financial Reporting Standards into the Financial Reporting System for U.S. Issuers. and

“Considering whether to further incorporate IFRS into the U.S. financial reporting system has also been a priority for me,” White said, who on several occasions since taking over the agency in April 2013 expressed interest in an IFRS rule. “And, it continues to be.”

White referred to then-SEC Chairman Mary Schapiro who spoke in 2011 that she was looking closely at the question of incorporating IFRS for U.S. public companies. In 2012, then-SEC Commissioner Elisse Walter said converging U.S. GAAP and IFRS was important for investors.

White said she endorsed the statements from Schapiro and Walter and that the interests of U.S. investors would be at the center of the agency’s decision. In addition, the SEC is committed to retaining the FASB as the accounting standard-setter for U.S. companies, and the U.S. role in developing global standards would factor into the decision.

“There are other questions we are being pressed to answer by, among others, our international regulatory and accounting counterparts,” White said. “They want to know whether, and, if so, when and how is the U.S.—and more particularly the SEC—going to incorporate or otherwise speak again as a commission to the issue of further incorporation of IFRS into the domestic capital markets.”

White said the SEC addressed its long-range goals for IFRS in February 2010 in Release No. 33-9109, Commission Statement in Support of Convergence and Global Accounting Standards, when it said a single set of global standards was consistent with the its mission of protecting investors.

“That remains true today, and I have made it a priority for the commission to position itself to make a further statement on this very important subject, now that we have six years of experience working on the priority convergence projects with the IASB and over six years of experience with foreign private issuers filing IFRS-prepared financial statements without a U.S. GAAP reconciliation,” White said.