Most of the world’s capital markets now require IFRS, or some form thereof, for financial statements of public-interest entities. The remaining major capital markets without an IFRS mandate are (i) the US, with no current plans to change; (ii) Japan, where voluntary adoption is allowed, and while there is a Japanese government agenda item to expand use of IFRS in Japan, currently no mandatory transition date has been established; (iii) India, which announced in January 2015 its final roadmap requiring the use over the next several years of Indian accounting standards that are significantly converged with IFRS; and (iv) China, which intends to fully converge at some undefined future date.
The discussion about the use of IFRS in the US continues. In public speeches over the past year, Chief Accountant of the SEC’s Office of the Chief Accountant, James Schnurr, discussed the potential for further incorporating IFRS into the US capital markets. Recently, Schnurr indicated that he is discussing a proposal with the Commission to allow domestic issuers to provide IFRS-based information as a supplement to US GAAP financial statements without requiring reconciliation.
Although Schnurr has acknowledged that there is continued support for the objective of a single set of high–quality, globally accepted accounting standards, he indicated that there is little support for the SEC to provide an option allowing domestic companies to prepare their financial statements under IFRS, and there is virtually no support to have the SEC mandate IFRS for all companies.
Schnurr continues to believe that for the foreseeable future, continued collaboration among the IASB, the FASB, the IFRS Foundation (the trustees of the IASB), and the Financial Accounting Foundation (the trustees of the FASB) is the only realistic path to further the objective of a single set of high-quality, global accounting standards. Accordingly, he has stated that how these entities decide to interact in the future is critical to this objective.
Although a mandatory change to IFRS for US public companies will not occur in the foreseeable future, IFRS is increasingly relevant to many US companies, big and small, public and non-public, because of: (i) cross-border, M&A activity; (ii) the reporting needs of non-US stakeholders; and (iii) the IFRS reporting requirements of non-US subsidiaries. Being financially “bilingual” in the US is increasingly important.
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