IFRS proposal from SEC likely to hit headwinds.The Securities & Exchange Commission (SEC) announced a phase-in period for a select group of very large corporations who will be able to use International Financial Reporting Standards International Financial Reporting Standards (IFRS) are standards and interpretations adopted by the International Accounting Standards Board (IASB).
Many of the standards forming part of IFRS are known by the older name of International Accounting Standards (IAS). (IFRS) for their filings starting in 2010. The move was expected, but it could be refined around the edges before the SEC issues a final rule. It's also possible that the Democrat-controlled Congress could cancel or modify any rule that the SEC issues. Democratic committee leaders have previously told SEC Chairman Chris Cox to "go slow" on any last-minute regulatory changes. Specifically with regard to IFRS, Democrats such as Sens. Chris Dodd (D.-Conn.) and Jack Reed (D.-R.I.)--not to mention either presidential candidate--are likely to be sympathetic to the feelings of investor and consumer groups who have considerable reservations about IFRS. Dodd is chairman of the Senate Banking Committee, and Reed is chairman of its securities, insurance, and investment subcommittee. One investor advocate group points out that the International Accounting Standards Board An editor has expressed concern that this article or section is .
Please help improve the article by adding information and sources on neglected viewpoints, or by summarizing and (IASB IASB
See International Accounting Standards Board (IASB). ) and Financial Accounting Standards Board Financial Accounting Standards Board (FASB)
Board composed of independent members who create and interpret Generally Accepted Accounting Principles (GAAP). (FASB FASB
See: Financial Accounting Standards Board
See Financial Accounting Standards Board (FASB). ) have both published documents critical of IFRS in four areas: revenue recognition, consolidation accounting, fair value measures, and derecognition accounting. The IASB has timelines to fix the first three standards, but who knows how long that will take. Don't expect them to be reworked by 2010. The SEC announcement on August 27 proclaimed the Commission's intention to allow a limited group of about 110 U.S. companies--representing the 20 largest companies in their respective industries--to use IFRS on a voluntary basis for filings in 2010. The SEC could rule in 2011 to open up early eligibility to additional companies starting in 2014. Clearly, business groups support that kind of time frame. Colleen Cunningham, regional managing director of Resources Global Professionals, Inc., and a former CEO (1) (Chief Executive Officer) The highest individual in command of an organization. Typically the president of the company, the CEO reports to the Chairman of the Board. of Financial Executives International (FEI), says, "As markets become more and more global, and all other major capital markets have embraced IFRS, it is clear that the SEC needed to require companies to begin the complex process of converting their books to IFRS."
PCAOB Survives Legal Challenge
The Public Company Accounting Oversight Board The Public Company Accounting Oversight Board (or PCAOB) (sometimes called "Peekaboo") is a private-sector, non-profit corporation created by the Sarbanes-Oxley Act, a 2002 United States federal law, to oversee the auditors of public companies. (PCAOB) has passed legal muster. A subgroup of judges on a federal appeals court rejected a challenge to the legality of the PCAOB that alleged its Board members should be appointed by either the President of the United States or the chairman of the SEC. PCAOB Board members are appointed by all five SEC commissioners collectively. The PCAOB was created by the Sarbanes-Oxley Act of 2002 to write and enforce auditor standards.
The lawsuit was brought by the Free Enterprise Fund and Beckstead & Watts, a small Nevada accounting firm that was being investigated by the PCAOB. The plaintiffs argued that, under the Constitution, principal federal officials must be named by the President; lesser officials may be picked by a department head. The plaintiffs said the SEC can't make lesser appointments because it is a five-member body, not a department head. The majority ruling disagreed, finding that PCAOB Board members are inferior officers who may be appointed by the SEC. Sam Kazman, general counsel for the Competitive Enterprise Institute and one of the attorneys in the case, stated, "The accounting board has acted in a manner befitting an unconstitutionally structured agency, imposing incredibly excessive regulations on the American economy." While the lengthy decision was still being analyzed, a petition for rehearing by the full circuit court is likely.
In other PCAOB news, the SEC endorsed and finalized a tweak to the PCAOB's independence rules. The new rule adds a requirement that an auditor not only tell a company's audit committee about any business it does with the company and its officers, but that the auditor also should document "the substance of its discussion with the audit committee."
STEPHEN BARLAS, EDITOR