By Emily Chasan
NEW YORK, Nov 18 (Reuters) - Just four days after releasing
a formal "roadmap" proposal to move U.S. companies to
international accounting rules, U.S. regulators are facing a
slew of complaints about the millions of dollars it would cost
companies to make the switch.
A top U.S. securities regulator said on Tuesday, that the
proposed transition toward international accounting rules in
the United States should not reduce the amount of information
available to investors, even if it requires companies to keep
dual sets of books for years at their own expense.
"We would not want to reduce the amount of information that
is available to U.S. investors," John White, the director of
the division of Corporation Finance for the U.S. Securities and
Exchange Commission said on Tuesday in response to concerns
from corporate finance executives about the cost of switching
to International Financial Reporting Standards (IFRS).
"Today the U.S. investor gets three years of information,"
White continued, saying that if companies transition by 2014,
as proposed, they would likely have to report results in IFRS
for the two previous years.
White's comments at a Financial Executives International
conference in New York stood in stark contrast to concerns
expressed by executives at the conference on Tuesday.
"I don't think this is a particularly good time, given the
economy to begin this massive ... move to IFRS," Talia Griep,
vice president and controller at manufacturer Honeywell
International Inc said on Monday. "It's just a tall
order to ask for any group of executives."
To make the switch, Griep estimated her company would have
to begin running parallel sets of accounting books, in U.S.
Generally Accepted Accounting Principles and IFRS by January,
2012 -- a move that would require more training, technology and
other costs for her accounting staff.
On Tuesday, the SEC's White acknowledged many companies
would prefer to run two sets of books "rather ... than go back
and reconstruct," their financials.
On Friday, the SEC released its formal proposal for a
"roadmap" that would have U.S. companies filing financial
results under IFRS by 2014. The release is open for public
comment until Feb. 19.
Under the proposed roadmap, in industries where a
significant majority of companies use IFRS, some U.S. companies
would have the option to file financial results under
international rules as soon as 2010.
According to the proposal, the SEC estimated that 34 out of
74 industry groups, or a minimum of 110 U.S. companies, would
be eligible to file financial results under IFRS by 2010,
according to the proposal. The SEC estimated the total cost of
transitioning to IFRS for those 110 companies would be $3.5
billion, or about $31.8 million on average.
While the SEC said it would be unlikely that all 110
eligible companies would elect to file results in IFRS, General
Motors Corp controller Nick Cyrus, said at the
conference, that the cost would be prohibitive, especially
since international and U.S. accounting rules have not fully
converged
"There's no first-mover advantage here ... resources are
scarce," Cyprus said. "I think there needs to be a lot more
convergence between U.S. GAAP and IFRS before I lead," the
effort to switch accounting rules.
To account for pension costs or intangible assets, like
research and development, some companies may even have to look
back as far as 10 or 15 years, Arnie Hanish, executive director
of finance and chief accounting officer at Eli Lilly and Co
& Co said at the conference.
Despite the cost, White said the SEC is eager to have some
U.S. companies file in IFRS.
"I think we would be disappointed if we have no companies
participate," White said, noting early participation could help
identify trouble spots ahead of time.
Some companies with many overseas rivals or subsidiaries
may find their financial results are more comparable to their
rivals if they file in IFRS. White said some companies had
already expressed interest in filing early to the SEC's chief
accountant, Conrad Hewitt.
(Reporting by Emily Chasan; Editing by Bernard Orr)
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