SEC Schizophrenic on Global Accounting
With surprising absence of fanfare, the Securities and Exchange Commission released over the weekend a 165-page document outlining its delayed and long-awaited proposals for how the US might switch from using its own generally accepted accounting principles to new international financial reporting standards. The release bears a schizophrenic quality. It offers one unsurprising and one surprising proposal.
The unsurprising portion reflects what the Commission reluctantly came to accept last summer: the US is not ready for such a switch and is not likely to be until 2014 at the earliest. Accordingly, the release principally outlines the many obstacles to such a switch and lays out milestones that would have to be met before considering such a radical move.
The surprising portion contemplates allowing selected US issuers voluntarily to make the switch as early as the year after next—2010. This radical proposal would be limited to US issuers whose industry uses IFRS as the basis of financial reporting more than any other set of standards. The release struggles to explain why this special approach for such issuers overcomes the many obstacles facing other US issuers.
It is not obvious that it succeeds. It is possible that the curious pair of proposals is the product of political compromise among internal SEC staff members—many passionately devoted most of their recent several years at the Commission to the project. But given the generally negative reception the SEC’s earlier more ambitious proposals received there is a serious risk that this attempt at a compromise approach will backfire.
Comments on the proposal, which warrants careful study, are due February 19, 2009. Alas, the new SEC release arrives too late for me to say anything about it in my analysis of the SEC’s vision—and obstacles it had not addressed—forthcoming in North Carolina Law Review that is literally being printed this week.
Hat tip: Barbara Black, Securities Law Prof, among the first to report the SEC’s surprisingly low-key release.