Would companies use voluntary, additive IFRS option?


By Ken Tysiac

A day after it was informally proposed, US Securities and Exchange Commission (SEC) Chief Accountant James Schnurr’s new idea for optional IFRS incorporation in the United States faced a key question.

“How many companies might take it up?” International Accounting Standards Board (IASB) Vice Chairman Ian Mackintosh said Tuesday at the American Institute of CPAs Conference on Current SEC and PCAOB Developments in Washington. “We don’t know. I have no real feel.”

In a conference speech Monday, Schnurr floated the possibility of keeping US GAAP for US public company financial reporting but also allowing companies the option of reporting supplemental information in IFRS. Schnurr plans to discuss options for additional IFRS reporting with SEC commissioners next year.

“We look forward to following the input that the SEC receives on an alternative,” FASB Chairman Russell Golden said at the conference.

Cost could be an obstacle to Schnurr’s idea because the IFRS reporting would be performed in addition to US GAAP reporting, rather than instead of it. That additional work would cost money for reporting that isn’t required.

Christopher Wright, a consultant and managing director and firm-wide leader of finance remediation and reporting compliance for Protiviti, said he imagines use of the additional reporting would be limited if it’s optional.

“If it’s voluntary, I’m not sure who would do it,” Wright said. “You might have the US [subsidiary] of a global company for whom that would be easier. There are costs involved in maintaining and converting books from IFRS to US GAAP and vice versa.”

Steven Jacobs, a partner in EY’s Professional Practice Group, said companies that have competitors that are foreign private issuers may want to consider providing the additional IFRS information.

“To me those are the kind of people that would be interested, if they want to have comparable information to their peers, and maybe they would want to do it,” Jacobs said. “But I’m not sure what that population is.”

Intel External Reporting Controller DawnDee Hankel said her company wouldn’t have consolidated IFRS information readily available to report.

“If I understand my management’s viewpoint, we generally don’t sign up for voluntary type of reporting activities that aren’t within the rule-making construct that we have today,” Hankel said. “We’d rather invest in R&D efforts or [chip fabrication] capacity first and foremost than compliance efforts that are voluntary.”

If Schnurr’s idea becomes reality, SEC Commissioner Daniel Gallagher said allowing companies to provide this information voluntarily could help establish whether there is a demand for IFRS reporting for US issuers.

But that premise may miss the point that costs – rather than lack of interest – may be what would prevent preparers from undertaking a voluntary, additive IFRS process.

“If it’s very few [who use the option],” Mackintosh said, “then it may not be a relevant test for the market.”

Ken Tysiac (ktysiac@aicpa.org) is a CGMA Magazine editorial director.

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