The Securities and Exchange Commission (SEC) recently released its long-awaited report on issues facing the U.S. in regards to International Financial Reporting Standards (IFRS). However, one important piece of information was missing from the SEC’s report - a recommendation on whether or not public companies should be required or permitted to adopt IFRS for their financial reporting.
John Nester, a spokesman for the SEC, did indicate that the SEC will make a recommendation regarding the adoption of IFRS, but did not indicate a timetable for such a decision. Experts believe that any decision will not come before the end of the year.
In the meantime, the Financial Accounting Standards Board (FASB) and the International Accounting Standards Board (IASB) are making significant progress will their convergence projects on leases, revenue recognition and financial instruments. Final standards on all three projects are expected by the middle of 2013.
In light of the SEC’s lack of a decision, it may be time for CPAs to turn their attention to the three convergence projects. These new standards will require a great deal of attention and are expected to have a significant impact on businesses of all sizes. The new lease standards will require assets and liabilities to be recorded on a company’s balance sheet. This could impact a company’s decision to finance a purchase of equipment versus leasing of equipment, not to mention the potential impact to existing debt covenants.
The new revenue recognition standards will eliminate certain industry-specific guidance as well as require enhanced disclosure. The new financial instruments standards are expected to have far less impact.
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