This week, the SEC decided to delay their decision on whetherU.S. companies will be required to convert from GAAP to IFRS. The decision came after nearly two years of anticipation. In February 2010, the SEC stated that it would decide whether or not to require a change in accounting standards after completion of its own work plan as well as convergence projects being undertaken by FASB and IASB. The SEC originally planned to make a final decision in mid-2011, but then extended the date to late 2011. In a speech on Monday, James Kroeker, chief accountant for the SEC, announced that both the work plan and the convergence projects were delayed and consequently a final decision from the SEC is “still many months away.”
The SEC’s delay is due, in part, to a determination by FASB and IASB to slow down and continue consideration on several “key” projects. This decision came after multiple convergence observers suggested adding time for deliberation and due process. This highlights the difficulty in crafting final standards that “represent long-term, implementable, and sustainable improvements,” according to Kroeker.
The delay may relieve many executives across the United States. According to a 2011 PwC survey, 43 percent of respondents believed the pace of recent standard-setting activity was too fast. The same respondents also indicated that the proposed changes to accounting standards would have a “pervasive impact” on their companies. Given the significance of a potential change in accounting standards, the SEC’s decision to delay a decision may be welcome for many in Corporate America.
While NACD sees room for improvement in the current auditor’s reporting model, in our comment letter to Docket 034, we urge the PCAOB to carefully examine the proposed changes to ensure the benefits of the additional work outweigh the costs. There is concern that these proposals could upset the role management and auditors play in asserting and attesting to information. Additionally, these additions —especially the proposed AD&A—may create confusion regarding responsibilities for oversight of the financial reporting and external audit processes.
NACD continues to comment on the other developments arising from the PCAOB. We plan to alert our membership as future comment letters are released.