A few weeks ago, the SEC issued two releases seeking comment on three of the six topics related to its work plan to consider incorporating IFRS into the financial reporting system for US companies. As you will recall, the work plan is designed to help the SEC determine whether – and if so, how and when – IFRS should be incorporated (and because this is that type of a baby step, that’s why technically they’re not “proposing” releases – but they do seek public comment). Comments are due by October 18th.
This release requests comments on a number of potential contractual and corporate governance issues, such as: how would companies deal with contracts which require or rely on financial statements prepared in accordance with GAAP (e.g., requirement to deliver financial statements audited in accordance with GAAP, covenants based on GAAP financials, earn-outs based on GAAP financials)? How would companies comply with the requirements to have an “audit committee financial expert”? How would companies deal with state statutes that use GAAP concepts for matters such as determining the ability to declare a dividend or determining when a shareholder vote is required for a disposition of assets?
And the other release seeks comment on: US investors’ current knowledge of IFRS and preparedness for incorporation of IFRS into the financial reporting system for US companies; how investors educate themselves on changes in accounting standards and the timeliness of such education; and the extent of, logistics for, and estimated time necessary to undertake changes to improve investor understanding of IFRS and the related education process to ensure investors have a sufficient understanding of IFRS prior to potential incorporation.
The questions raised by these two releases are far-reaching and illustrate a number of potential “traps for the unwary” for US companies after implementation of IFRS for financial reporting purposes. This KPMG memo in our “IFRS” Practice Area explains more…
The FASB’s Growth Spurt; Chair Bob Herz Retires
As noted in this press release, the FASB intends to grow from five to seven members (which is the size it had from ’73-’08; the reduction to five a few years ago was widely criticized). And Chair Bob Herz will soon retire, replaced by Leslie Seidman on an interim basis starting on October 1st.
Six Senators Seek Improved Off-Balance Sheet Disclosure
– Broc Romanek