V. Benefits and Risks
Incorporation of IFRS through the framework could advance the United States toward the
broader objective of a single set of high-quality, globally accepted accounting standards,
while enabling U.S. constituents to more effectively manage the costs and efforts
necessary to reach that objective, through phased transition to and, in many cases,
prospective application of IFRSs.
Undoubtedly, there would be advantages and disadvantages to any approach taken to
incorporate IFRS, if the decision were made to do so. The Staff will continue to identify
and analyze the potential benefits and risks of the framework, as compared to other
possible incorporation approaches, in anticipation of the Commission evaluating whether
the framework or another approach would be a suitable approach if the Commission
determines to incorporate IFRS into the U.S. financial reporting system. Although not an
exhaustive list, the following are potential benefits and risks of the framework that have
been identified thus far:
·
Supports a flexible, tailored transition strategy
The framework may allow for a more flexible transition strategy that could be
better tailored and more responsive to the needs of U.S. constituents than other
potential mechanisms for incorporation. The framework could be tailored for
individual IFRSs. The FASB would evaluate each of the IFRSs individually to
determine the timing and manner of transition in an effort to minimize the overall
burden of transition. This approach could provide the benefit of incorporating
IFRSs only when a singular transition was expected because IFRSs would be
incorporated only when newly issued or when they were in a static state and not
expected to be modified in the near term. In the case of newly issued IFRSs, there
could be an added benefit of the new standard presumably being of higher quality
than that which it replaced, which more directly contributes to the overall goal of
incorporating high-quality standards into U.S. GAAP. Additionally, the
framework could allow for broad U.S. constituent influence on a greater share of
the IFRSs to be incorporated into U.S. GAAP, as several legacy IFRSs that are to
be replaced in the near term would not be incorporated into U.S. GAAP.
The FASB would specify the manner of transition for individual IFRSs, or groups
of IFRSs, with an objective of maximizing the number of IFRSs incorporated
prospectively. Doing so could reduce the volume of required systems changes
and the need to restate or recalculate amounts for certain standards (as illustrated
in the property, plant, and equipment example above). A U.S.-specific transition
strategy also would limit the need for short-term U.S.-specific amendments to
existing IFRSs and additions to IFRS 1, First-time Adoption of International
Financial Reporting Standards, to accommodate U.S.-specific circumstances.
The benefits of a tailored transition strategy would be minimized, and potentially
eliminated, if the transition plan were not well-developed, comprehensive, and
flexible enough to adapt to changing circumstances during transition in a
20
Summary :
This approach could provide the benefit of incorporating IFRSs only when a singular transition was expected because IFRSs would be incorporated only when newly issued or when they were in a static state and not expected to be modified in the near term. Additionally, the framework could allow for broad U.S. constituent influence on a greater share of the IFRSs to be incorporated into U.S. GAAP, as several legacy IFRSs that are to be replaced in the near term would not be incorporated into U.S. GAAP. The FASB would specify the manner of transition for individual IFRSs, or groups of IFRSs, with an objective of maximizing the number of IFRSs incorporated prospectively.
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