---
title: "PwC In brief: SEC publishes progress report on IFRS Work Plan"
description: We thought this would be a great article for our readers - brought to you by PwC  On October 29 2010 the SEC published the first   progress report
---

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## PwC In brief: SEC publishes progress report on IFRS Work Plan

Posted by Bill Bockwoldt on November 4, 2010

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We thought this would be a great article for our readers - brought to you by PwC:

On October 29, 2010, the SEC published the first [progress report](http://www.sec.gov/spotlight/globalaccountingstandards/workplanprogress102910.pdf) on its [Work Plan](http://www.sec.gov/rules/other/2010/33-9109.pdf) for global accounting standards. The purpose of the Work Plan is to gather information that will inform the SEC’s decision in 2011 as to whether, when and how to incorporate IFRS into the financial reporting system for U.S. companies.1 Much of the Work Plan is currently in process and will not be completed until 2011.

**What are the SEC's observations?**

*Sufficient development and application of IFRS for the U.S. domestic reporting system*  
The SEC’s observations to date in this area relate to understanding the various approaches taken by other jurisdictions to incorporate IFRS, including the role of the national standard setter. The SEC observed that, although some jurisdictions have mandated the use of IFRS as issued by the IASB, the majority have incorporated IFRS into their national accounting standards. With respect to the latter, some jurisdictions incorporated local variants of IFRS.

The SEC noted that not all jurisdictions make use of a private sector standard setter, but instead use a securities regulator, ministry of finance or other government agency to set accounting standards. For jurisdictions that previously used a private sector standard setter, the SEC observed that the majority retained their national standard setter after incorporating IFRS. The roles played by these national standard setters have varied, but include acting as an endorser of IFRS, facilitating dialogue between the IASB and the jurisdiction, and issuing standards for entities not required to apply IFRS.

The SEC is still in the process of evaluating various aspects of IFRS, including whether it is sufficiently comprehensive. In addition, the SEC is still evaluating the comparability of IFRS as applied in practice across jurisdictions, along with the auditability and enforceability of IFRS. Accordingly, the progress report does not yet include observations in these areas.

*Independent standard setting for the benefit of investors*  
With respect to independent standard setting, the SEC has focused its efforts to date on evaluating the funding mechanisms and independence of the IASB. Despite efforts by the IFRS Foundation (which as a non-governmental organization has no authority to impose funding requirements), the SEC noted that the IASB has not yet secured long-term funding. The IASB's method of obtaining funding also varies on a country by country basis. Consequently, the SEC observed that the IASB and the IFRS Foundation do not meet certain minimum structural and funding independence requirements embedded in U.S. law and regulations. However, the SEC plans to continue gathering information about contribution alternatives that might help the development of a steady and independent method to fund the IASB.

*Investor understanding and education regarding IFRS*  
The SEC is now conducting research aimed at understanding U.S. investors’ current knowledge of IFRS, how those investors educate themselves on changes in accounting standards, and the time required to do so. The SEC released a request for comment in August 2010 soliciting input on these areas. After reviewing these responses, the SEC will determine whether further outreach is necessary. Based on initial feedback, U.S. investors’ understanding and education of IFRS has begun to develop.

*Regulatory environment*  
The SEC is evaluating the impact of potential IFRS adoption on U.S. regulatory regimes, primarily through outreach to numerous U.S. regulators. Based on discussions to date, a consistent area of concern and focus for regulators is the mechanism for the incorporation of IFRS into these regulatory regimes. Regulators have commented that a mechanism that incorporates IFRS directly into U.S. GAAP would resolve a number of significant issues identified through the outreach. Certain industry regulators, while broadly supporting a single set of high-quality global accounting standards, are concerned with several key issues, including: (i) the significant costs to modify internal processes and systems; (ii) the perceived diminished ability to influence the standard-setting process; and (iii) the general absence of industry-specific guidance in IFRS.

*Impact on issuers*  
Through the Work Plan, the SEC is evaluating the level of effort and logistics required by U.S. issuers to incorporate IFRS. Thus far, the SEC has focused its efforts on the effect that IFRS would have on contractual arrangements and compliance with corporate governance standards. In both instances, the SEC has solicited public comment to aid in its analysis. The SEC is now analyzing the feedback received and will determine whether further outreach is necessary.

*Human capital readiness*  
While noting its belief that it is more efficient to assess human capital readiness after further progress on the Work Plan, the SEC did provide an update on actions it plans to take. These activities include outreach to academics, members of professional associations and others to understand the time that would be needed to educate individuals prior to transition to IFRS. The SEC also plans to meet with accounting firms, foreign regulators and others to understand the potential impact on audit quality, cost and competitiveness.

**Who’s affected?**

The final decision of whether, when and how to adopt IFRS will directly affect U.S. public companies, and may indirectly affect private companies.

**What’s next?**

The SEC expects to continue to report periodically on the status of the Work Plan until its expected decision in 2011 on the future role of IFRS in the U.S.

**Questions?**

PwC clients with questions about this *In brief* should contact their engagement partner. Engagement teams that have questions should contact any member of the SEC Services team in the National Professional Services Group.

_______________________  
1 The Work Plan is intended to address the following areas: (i) sufficient development and application of the IFRS for the U.S. domestic reporting system; (ii) the independence of standard setting for the benefit of investors; (iii) investor understanding and education regarding IFRS; (iv) examination of the U.S. regulatory environment that would be affected by a change in accounting standards; (v) the impact on issuers, both large and small, including changes to accounting systems, changes to contractual arrangements, corporate governance considerations, and litigation to contingencies; and (vi) human capital readiness. See PwC’s [Dataline 2010-12](http://cfodirect.pwc.com/CFODirectWeb/Controller.jpf?ContentCode=THUG-83EN57&SecNavCode=TMCB-4L9HAT&ContentType=Content) for a summary of the Work Plan.

**Authored by:**  
Douglas T. Parker  
Partner  
Phone: 1-973-236-4707  
email: [douglas.t.parker@us.pwc.com](mailto:douglas.t.parker@us.pwc.com)

Traci A. Hornfeck  
Senior Manager  
Phone: 1-973-236-5032  
email: [traci.a.hornfeck@us.pwc.com](mailto:traci.a.hornfeck@us.pwc.com)

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