Back to Insights

IFRS Delayed, New U.S. Standards Critical

Brian J. Sharkey, CPA, CVA, CEPA Director-in-Charge, Transaction Advisory & Business Valuation

The U.S. movement to International Financial Reporting Standards (IFRS) is not going to happen with the flick of a switch.

Over the past several years, the Financial Accounting Standards Board (FASB) issued various accounting standards developed in close consultation with the International Accounting Standards Board (IASB). As a result, U.S. and international standards in those areas are essentially the same. However, despite this progress, some very large hurdles need to be cleared to align the two sets of accounting standards.

The first hurdle is the Securities and Exchange Commission (SEC). While the SEC publicly indicates its support of a global set of standards, it has not yet endorsed IFRS. The SEC indicated that it expected a conclusion before the end of 2011; however, recently Jim Kroeker, the SEC’s chief accountant, said the SEC may delay its decision on IFRS for several more months. While he was optimistic that the SEC would move forward in developing a combined accounting model, the continuing delays undoubtedly only further postpone the movement toward a converged set of standards.

Another hurdle is the upcoming U.S. presidential election. The initial convergence initiative was championed by the Bush administration’s SEC chief, Christopher Cox. We saw a much more cautious tone when the Obama administration took office. It is certainly reasonable to question whether a change in administration would have a significant impact on the pace of the convergence process.

These delays have not been lost on the IASB. In a move many interpreted as an effort to light a fire under the SEC, the group that monitors the IASB recently amended its rules to indicate that beginning in 2013, only entities that have mandated IFRS in their own domestic markets can participate in the IASB’s oversight committee — effectively prohibiting the SEC’s involvement in the oversight committee unless the SEC moves forward with an endorsement of IFRS.

In any event, the time necessary to resolve these regulatory issues as well as pore over and resolve the enormous number of differences between the standards means that the convergence to a single set of international accounting standards is likely years away from becoming a reality. What U.S. companies can expect is a much more rapid pace of change to U.S. standards, as the FASB addresses the myriad of differences between the two sets of standards. Accordingly, it will be imperative for companies to keep a close eye on the FASB to determine the impact of these changes on financial statements, contractual arrangements and business processes. As events continue to unfold, we will keep you updated.

Brian J. Sharkey can be reached at Email or 215.441.4600.

Contact the Author

Brian J. Sharkey, CPA, CVA, CEPA

Brian J. Sharkey, CPA, CVA, CEPA

Director-in-Charge, Transaction Advisory & Business Valuation

Manufacturing & Distribution Specialist, M&A/ Transaction Advisory Services Specialist, ESOPs Specialist, Business Valuation Specialist, Owner Operated Private Companies Specialist, Private Equity-Backed Companies Specialist

Contact Us

We invite you to connect with us to discuss your needs and learn more about the Kreischer Miller difference.
Contact Us
You are using an unsupported version of Internet Explorer. To ensure security, performance, and full functionality, please upgrade to an up-to-date browser.