The last blog presented an introduction to the SEC’s Roadmap for US adoption of IFRS. In a short series of related blogs, I will address the strategic demands the agency is making within the roadmap, as basis for its sign-on to the movement toward a single set of global reporting standards.

The SEC indicates US adoption of IFRS relies on three core “milestones” being achieved. The first two place the burden on international constituencies:

The advantages to U.S. investors of increased comparability across investment alternatives, as contemplated under this Roadmap, are dependent upon financial reporting under IFRS that is, in fact, consistent across companies, industries and countries. (p. 20)

The US agency recognizes there is no advantage to the US investor from adopting IFRS if it does not result in comparability of financial information globally. It understands that jurisdictional caveats to IASB rulemaking only reproduces current differences and at significant costs to business and investors.

In the event a broad constituency of international nations agree to consistent and comparable application and interpretation of IFRS, the SEC believes the essential first step in demonstrating it would be ensuring the principal independent rulemaking arm is funded for a substantial forward period.

We believe that our future determination regarding the required use of IFRS for all U.S. issuers should only occur after the IASC Foundation reaches its goal of securing a stable funding mechanism that supports the independent functioning of the IASB. (p. 26)

With those two pillars established, the SEC would then begin to lean on US preparers and auditors to engage the process for educating and transitioning the vast US financial reporting mechanism to IFRS.

The education and ongoing training of most accountants in the United States is limited to or predominantly focused on the current provisions of U.S. GAAP. Consequently, many parties would likely need to undertake comprehensive education on IFRS (p. 29).