The Securities and Exchange Commission (SEC) is looking to improve the International Financial Reporting Standards (IFRS) based on feedback from both investors and financial statement preparers, according to Steven Jacobs, partner with Ernst & Young.
Jacobs sat down with REIT.com at REITWise 2012: NAREIT's Law, Accounting & Finance Conference in Hollywood, Fla., last month to discuss several key SEC issues that may affect REITs.
He said while there was a deadline of June 2011 to have a vast majority of the work done, the SEC delayed completion for the sake of quality as opposed to meeting a tight deadline.
"They listened to a lot of what the preparer community has said (about the standards) and how easily they would be to apply or how complicated they would be to investors," Jacobs said. "They really are working on improving those standards in a way that is gratifying for investors, as far as the quality of reporting, and a in a way that is easy to apply and practical for the preparer community."
Jacobs also talked about the "condorsement" approach, which would allow FASB to retain control over U.S. Generally Accepted Accounting Principles (GAAP). He said condoresment may make it easier for a full scale, mandated IFRS switch.
"I think it's probably the best way forward for the U.S. in getting closer to IFRS for a number of different reasons," he said. "Most importantly, it keeps the U.S. sovereignty over accounting standards. The FASB (Financial Accounting Standards Board) continues to exist and be overseen by the SEC. Therefore, we're not pushing our standards into any political pressure that may be taking place overseas."
In doing so, Jacobs said, it's also still narrowing the difference between the U.S. GAAP and IFRS. He said while companies may not have completely comparable financial statements for competitors globally, with condorsement they may have financial statements that are much closer to IFRS that includes key differences that users can easily identify.
Jacobs is also monitoring the Dodd-Frank Act implementation and the amount of resources and time its taking away from other projects. He's also paying attention to regulations for capital formation.
"The SEC is very focused on capital formation, especially for smaller companies, to maintain the competitivenss of the U.S. markets," he said.