SEC heads for IFRS acceptance by 2014

The US Securities and Exchange Commission (SEC) aims to bring international financial reporting standards (IFRS) into use in the US within the next six years.

The SEC announced yesterday that its roadmap, to be published shortly for public comment, would lead to the standards being available to US issuers by 2014, potentially replacing the US generally accepted accounting standards (Gaap).

The commission will take a firm decision on whether to make the move in 2011, but the news was welcomed by the financial industry. Barry Melancon, president of the American Institute of Certified Public Accountants, said: "We believe the capital markets ultimately will insist on IFRS for public companies. Today's action by the SEC continues a robust and thoughtful debate that is critical as the transition occurs." A faster transition would be difficult, as 31% of the institute's members believed they would need four to five years to prepare for the move, the institute added.

And James Turley, chief executive of Ernst & Young, commented: "The dominant language of financial reporting worldwide is fast becoming IFRS. Notwithstanding the strength and size of the US capital market, we cannot afford to be left behind."

But the consequences of the convergence for firms' balance sheets could be massive. The recent decision by the US Financial Accounting Standards Board to force banks to account for - potentially - trillions of dollars worth of off-balance sheet assets raised fears of a massive shock to an already beleaguered industry. However, this move can be seen as part of the process of convergence on IFRS standards, industry observers say.

See also: Risk Books: SEC Regulation Outside the United States