Bricker puts IFRS back on the regulatory agenda

Wes Bricker, the SEC’s chief accountant, said the market regulator is ready to resume its consideration of the use of IFRS in U.S. companies’ regulatory filings.

“It is worth continuing to consider the proposal that Jim Schnurr described at an earlier conference of allowing domestic issuers to provide IFRS-based information as a supplement to GAAP financial statements,” Bricker said on Dec. 5, 2016, at the AICPA National Conference on SEC and PCAOB developments in Washington. Schnurr, Bricker’s predecessor, left the SEC on Nov. 22 while still recuperating from a serious injury he suffered in April. Bricker was named to the chief accountant’s post upon Schnurr’s departure after having filled in for him on an interim basis since August.

Bricker does not foresee immediate changes, in part because the regulatory process moves slowly under the best of conditions, and the SEC has considered the use of international standards in the U.S. market on an on-again, off-again basis for years and made limited progress. In addition, domestic companies are generally not interested in abandoning U.S. GAAP or incurring the extra cost of adding IFRS-based exhibits to their regulatory filings.

Most of all, the SEC’s leadership is in flux. Chair Mary Jo White will step down in January when Donald Trump is inaugurated as president, and until the incoming administration names a new chair and two appointees to fill the other vacancies on the commission, the support for IFRS among the agency’s leadership will remain an unresolved question.

When he was asked about the timing of a proposal after the speech, Bricker told reporters he does not expect immediate action.

“In terms of the priorities of the commission, the commission will separately need to evaluate,” he said.

Schnurr used his speech to the AICPA conference in December 2014 to float the idea, and his staff drew up a proposal that has lingered inside the SEC for the past two years because of a lack of clear support for moving forward. Under the plan, companies would get some exemptions from Regulation G, which, among other things, requires companies that use non-GAAP financial information in their filings to reconcile the differences between IFRS and U.S. GAAP. The supplemental IFRS information will be treated as non-GAAP information. The Reg G waiver was included to contain costs for companies that want to provide IFRS information.

Bricker emphasized the importance of IFRS to both U.S. investors and companies.

U.S. investors continue to rely on financial reporting by global companies, whether they are U.S. multinationals with foreign subsidiaries or foreign companies that file regulatory reports in the U.S., he said. Securities of about 525 foreign companies with a market value of about $7.3 trillion trade on U.S. markets as of September 2016.

Many U.S. companies also continue to have an “ongoing interest in the quality of IFRS,” he said. “U.S. companies frequently look abroad for potential targets and investees that use IFRS. In addition, U.S. multinational companies with foreign subsidiaries may be permitted or required by other countries to apply IFRS for statutory financial reporting requirements for their non-U.S. subsidiaries. U.S. companies also enter into transactions with non-U.S. companies and other stakeholders who are required to use IFRS financial statements. Still others prepare management information using IFRS.”

In the meantime, Bricker encouraged the FASB and the IASB to continue eliminating differences between the two sets of standards.

“I believe that both the FASB and the IASB will benefit from continued collaboration as both boards continue to eliminate differences as a means of achieving progress towards the objective of high-quality accounting standards in the U.S. and globally,” Bricker said.

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