SEC Work Plan on IFRS Progress Report

The SEC Staff has published its first progress report on the “Work Plan for the Consideration of Incorporating International Financial Reporting Standards into the Financial Reporting System for U.S. Issuers.” As you are aware the SEC has been studying whether to allow U.S. issuers in the U.S. to use IFRS. The SEC directed the SEC Staff to come up with a work plan to determine whether, when, and how current financial reporting system for U.S. issuers should be transitioned to a system that incorporates IFRS. The Work Plan was published in February 2010 and covers the following area:

Characteristics of IFRS and standard-setting process:

• Sufficient development and application of IFRS for the U.S. domestic reporting system.
• The independence of standard setting for the benefit of investors.

Transition considerations:

• Investor understanding and education regarding IFRS.
• Examination of the U.S. regulatory environment that would be affected by a change in accounting standards.
• The impact on issuers, both large and small, including changes to accounting systems. changes to contractual arrangements, corporate governance considerations, and litigation contingencies.
• Human capital readiness.

The update draws no major conclusions. However, you will find some areas of particular interest in the progress report including concerns about the funding of the IASB which is funded by voluntary contributions. In addition industry regulators are concerned about the general lack of industry-specific standards and practices in IFRS. Work is also being done to analyze federal and state tax impacts, audit regulation and standard setting and broker-dealer and investment company reporting. Another issue has to do with the method of any incorporation of IFRS because of the incorporation of ‘U.S. GAAP’ references currently in U.S. laws, contractual documents, regulatory requirements and guidelines, and similar documents.

You may download the Work Plan Progress Report at www,sec.gov/spotlight/gloabalaccountingstandards/workplanprogress102910.pdf.

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