SEC proposes roadmap for IFRS adoption

Ernst & Young has released a Hot Topic discussing the recent release of the SEC’s proposed roadmap for International Financial Reporting Standards (IFRS) adoption in the U.S. This step represents the most significant step to date by the SEC toward the adoption of a single set of high quality global accounting and financial reporting standards that everyone can use. The dominant language of financial reporting worldwide is fast becoming IFRS. Notwithstanding the strength and size of the U.S. capital market, the U.S. cannot afford to be left behind. A change to a common global accounting language will also benefit investors and market efficiency by increasing the transparency and comparability of information.

The proposed Roadmap anticipates mandatory reporting under IFRS beginning in 2014, 2015 or 2016 depending on the size of the issuer and provides for early adoption in 2009 by a small number of very large companies that meet certain criteria. It is also possible that the SEC will later decide to permit other companies to early adopt at some point prior to the mandatory date of conversion. In addition, the Roadmap is expected to include a number of milestones, including improvements in accounting standards, accountability and funding of the International Accounting Standards Committee Foundation, improvement in the use of interactive data for IFRS, and enhancements to IFRS training and education, that the SEC will consider in making its decision in 2011 about whether to proceed with mandatory adoption of IFRS.

While there will be many challenges associated with conversion to IFRS, a U.S. shift to the global standard will provide continuous benefit. With respect to this matter, Ernst & Young believes that with the SEC’s action, the U.S. – like the rest of the world – is on the right path. You can access the entire Hot Topic here and the SEC Press Release is available here.