In the Commission Statement in Support of Convergence and Global Accounting Standards, the U.S. Securities and Exchange Commission (“SEC” or “Commission”) directed the staff of the Office of the Chief Accountant of the SEC, with appropriate consultation with other Divisions and Offices of the Commission (collectively, the “Staff”), to develop and execute a work plan (“Work Plan”) for the consideration of IFRS as issued by the IASB into U.S. financial reporting system. The Staff published the Work Plan in February 2010. The Work Plan addresses the following areas:
1. Sufficient development and application of IFRS for the U.S. domestic reporting system;
2. The independence of standard setting for the benefit of investors;
3. Investor understanding and education regarding IFRS;
4. Examination of the U.S. regulatory environment that would be affected by a change in accounting standards;
5. The impact on issuers, both large and small, including changes to accounting systems, changes to contractual arrangements, corporate governance considerations, and litigation contingencies; and
6. Human capital readiness.
The first two areas consider characteristics of IFRS and its standard-setting process that would be the most relevant to a future determination by the Commission regarding whether to incorporate IFRS into the financial reporting system for U.S. issuers. The remaining four areas above relate to transition considerations that will enable the Staff to better evaluate the scope, timing and approach to changes that would be necessary to effectively incorporate IFRS into the financial reporting system for U.S. issuers, should the Commission determine in the future to do so.
Since February 2010, the Staff has invested significant time and effort in executing the Work Plan. The progress report summarizes the objectives of each section of the Work Plan and discusses the Staff’s efforts and preliminary observations to date, as applicable. Many of the Staff’s efforts are currently in process and are not expected to be completed until 2011, particularly as they relate to consideration of the sufficient development and application of IFRS for the U.S. domestic reporting system and the independence of standard setting for the benefit of investors.
The Staff developed the Work Plan based on its understanding of the environment at the time of publication, with the expectation that the Work Plan would be re-assessed and adjusted as new information is obtained, developments occur, or constraints are encountered, with the intention of accomplishing each section’s stated objective to the maximum extent possible.
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