Using SEC Resources to Incorporate IFRS Content in Intermediate Accounting
Linda Matuszewski
Northern Illinois University
Linda J. Matuszewski is an Associate Professor of Accountancy at Northern Illinois University.
She teaches courses in managerial and financial accounting at the undergraduate level. Dr.
Matuszewski is a CPA (inactive) and a member of the AICPA, the American Accounting
Association, the Illinois CPA Society and the Institute of Management Accountants. Her primary
research interest involves the study of the effect of preferences for honesty and fairness on the
decisions of accounting managers. Her work has been published in Journal of Management
Accounting Research, Advances in Accounting Education: Teaching and Curriculum
Innovations, Cost Management, and Strategic Finance.
Abstract
Frequent changes in the movement toward achieving a single set of high-quality, global
accounting standards make it challenging to keep the content of intermediate accounting
textbooks up-to-date with respect to this issue. This project utilizes a variety of publicly
available U.S. Securities and Exchange Commission (SEC) documents to supplement textbook
materials and help students better understand the SEC’s evolving efforts in deciding whether and
how to incorporate International Financial Reporting Standards (IFRS) for U.S. issuers. It was
assigned during spring 2012 in an intermediate financial accounting course (ACCY 331 –
Financial Reporting I), which is an undergraduate course, typically taken in the second semester
of a student’s junior year. Students read and answer questions about the SEC statement in
support of global accounting standards, the “Work Plan,” progress reports, staff papers, and
comment letters. In completing the project, students gain an appreciation for the complexity of
this issue as well as an understanding of the wide range of opinions among various stakeholder
groups, including public corporations, public accounting firms, standard setters, accounting
professional organizations, investors, creditors, accounting educators, and others. The project
reinforces textbook coverage of the major differences between U.S. GAAP and IFRS, and helps
prepare students for their future practice in a world with global accounting standards. Project
instructions have been shared to help other instructors implement this project in a cost-effective
manner. Solutions and grading rubrics are available upon request. Contact Linda at
lmatus@niu.edu or 815-753-6379.
Learning Objectives
The main objectives of the project are to increase students’ knowledge of the Security and
Exchange Commission’s (SEC’s) evolving efforts in deciding whether to incorporate IFRS for
U.S. issuers, and to increase their understanding of how this might be accomplished. A third
objective is to increase students’ understanding of similarities and differences in the opinions of
various stakeholder groups (the FASB, financial statement preparers, auditors, investors,
educators and others) regarding this potential change. Throughout the semester, students learn
the differences between U.S. GAAP and IFRS as various topics are covered through traditional
means such as lectures, homework assignments and exams. A fourth objective of this project is
to reiterate some of these differences to increase retention of this knowledge.
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ACCY 331 – Spring 2012
IFRS Project – Part I
Instructions
Purpose:
In recent years, many accounting standard setters, regulators, company leaders and market
participants have set a goal of achieving a single set of high-quality, common accounting
standards used around the world. The purpose of Part I of this project is to increase your
knowledge of the Security and Exchange Commission’s (SEC’s) evolving efforts in deciding
whether and how to incorporate IFRS for U.S. issuers.
You will work in the teams of three formed earlier in the semester on this part of the project.
The source documents needed to complete this project are all located on the SEC website under
“Spotlight on Work Plan for Global Accounting Standards” at
http://www.sec.gov/spotlight/globalaccountingstandards.shtml
After completing all parts of the project, each member of your team must complete a Peer
Evaluation Form to rate the performance of each team member. I reserve the right to lower the
grade of any team member if the peer evaluations suggest that his or her attitude, attendance
and/or contribution were substantially less than those of the other team members.
Format for written report:


Your report should include a heading that identifies the name of each of your group
members.
Your answers should be reported in the same order that the requirements are listed below.
Provide your answers using full sentences. Either repeat the question, or write your
answer in such a way that the question being answered is clear. Whenever possible, you
should use your own words in your answers. However, if you choose to quote from
the source documents, be sure to use quotation marks, clearly identify the document you
are citing, and indicate the page number within the source document.
Point value: 50 points
Due Date: March 22, 2012, no later than 4:30 pm. Your team must submit one electronic copy
of your document via Blackboard.
Requirements:
1. On February 24, 2010, the Securities and Exchange Commission issued RELEASE NOS.
33-9109; 34-61578 “Commission Statement in Support of Convergence and Global
Accounting Standards”. Read this statement (available at
http://www.sec.gov/rules/other/2010/33-9109.pdf), and answer the following questions.
a. Briefly describe the SEC’s goals in promoting a single set of high-quality globally
accepted accounting standards.
b. What benefits does the SEC believe would result from global accounting
standardization through convergence?
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c. Briefly describe the actions the SEC took in response to the Sarbanes-Oxley Act
of 2002.
d. Briefly describe the two actions the SEC took in 2007.
e. In 2008, the SEC released a Proposed Roadmap leading to an eventual decision
about whether to require the use of IFRS by U.S. issuers, and received over 200
comment letters from market participants. What was the potential benefit from
the use of a single set of global accounting standards cited most frequently by
commenters? Briefly describe a few of the concerns raised by commenters in
response to the Proposed Roadmap.
f. In an appendix to the document, the SEC includes a Work Plan that will be
executed before they will decide whether to require the use of IFRS by U.S.
issuers. Briefly describe each of the six areas of concern that will be addressed in
the work plan.
g. What is the SEC’s estimate of the number of years U.S. issuers would need to
successfully incorporate IFRS into their financial reporting systems?
h. Briefly describe the SEC’s belief about the role the FASB would play in standard
setting if U.S. issuers were required to use IFRS.
2. On October 29, 2010, the SEC released a Progress Report on the work plan. Read this
Progress Report (available at
http://www.sec.gov/spotlight/globalaccountingstandards/workplanprogress102910.pdf)
and answer the following questions.
a. The Progress Report describes two categories of approaches that have been used
when jurisdictions incorporate IFRS into their financial reporting system. Briefly
compare and contrast these two categories.
b. Do most jurisdictions retain their national standard-setting body after
incorporating IFRS into their financial reporting system? Explain.
c. The SEC is closely following the work of the Monitoring Board, which oversees
the IFRS Foundation, and is currently reviewing its governance framework. As
part of this review, the Monitoring Board made a statement regarding the primary
objective of financial reporting. In this statement, the Board identified four
qualities that make information decision-useful for present and potential investors.
What are these four qualities?
d. Compare and contrast the current funding models for the IFRS Foundation and
the FASB.
e. In the section on the Regulatory Environment, the Progress Report notes that
various industry regulators generally support the movement toward a single set of
high-quality global accounting standards, but also notes that they have several
concerns. Briefly describe a concern raised in the Progress Report.
f. Members of the SEC staff have been meeting with the Internal Revenue Service
(IRS) and the U.S. Department of the Treasury. In these meetings, four areas with
significant ramifications have been identified. Briefly describe one of these four
areas.
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3. On May 26, 2011, the SEC released “Staff Paper: Exploring a Possible Method of
Incorporating IFRS”. Read this Staff Paper (available at
http://www.sec.gov/spotlight/globalaccountingstandards/ifrs-work-plan-paper052611.pdf) and answer the following questions.
a. While the SEC did not intend for the framework discussed in this paper to be
interpreted as the preferred approach, they presented it to illustrate three main
points. Briefly describe these three points.
b. Compare and contrast the approaches taken by the People’s Republic of China
and the European Union (EU).
c. How do the operating framework and the transition element described in this
paper compare to the approaches taken by China and the EU?
d. Briefly describe the role of the FASB in the framework presented in this paper. In
what ways is this description similar or different from the description of the role
of the FASB in the 2/24/2010 statement you read in item 1?
e. Under the framework presented in this paper, what is described as the most likely
example of a modification to IFRS?
f. Compare and contrast the role of the SEC in relation to the FASB and the IASB.
g. Does the SEC currently participate in the international standard setting process?
Explain.
h. The paper indicates “The FASB would be a facilitator of effective communication
between the IASB and U.S. Constituents…” Does the SEC envision the FASB
serving as the single U.S. voice in global standard setting efforts? Explain.
i. Identify the three categories of IFRS identified in the strategy for transition. In
each category describe one of the examples the SEC uses as an illustration.
j. The final section of the document describes benefits and risks of the approach
described in this document, and the SEC asked constituents to share their views
by writing comment letters. Imagine that your team was writing a comment
letter. Briefly describe your opinions on the pros and cons of the approach
described in this document.
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4. The SEC staff requested comments on the possible method described in the Staff Paper.
Over 150 letters were received. Various stakeholder groups are represented in the letters.
In the table on the next page, I have identified several writers of comment letters in each
of six categories of stakeholders. Comment letters are posted on the SEC website at
http://www.sec.gov/comments/4-600/4-600.shtml. Download and read at least one letter
from each category in the table on the next page (at least six letters in total) and
compare and contrast the writers’ comments.
Stakeholder
Category
Public
Accounting
Firm
Public
Company
FAF / FASB
Accounting
Educator /
Other
Date of
Comment Letter
Aug. 8, 2011
Aug. 1, 2011
Jul. 29, 2011
Jul. 29, 2011
Aug. 19, 2011
Jul. 27, 2011
Jul. 31, 2011
Jul. 29, 2011
Nov. 15, 2011
Jul. 1, 2011
Jul. 3, 2011
Jul. 26, 2011
Aug. 17, 2011
Accounting
Professional
Organization
Aug. 2, 2011
Jul. 31, 2011
Jul. 28, 2011
Aug. 3, 2011
Jul. 31, 2011
Investors and
Creditors
Aug. 1, 2011
Jul. 28, 2011
Written by
Deloitte & Touche LLP
PricewaterhouseCoopers LLP
Crowe Horwath LLP
KPMG LLP
Arnold C. Hanish, Vice President, Finance and Chief
Accounting Officer, Eli Lilly and Company
Kevin M. Ozan, Corporate Senior Vice President –
Controller, McDonald’s Corporation
Bob Laux, Senior Director, Financial Accounting and
Reporting, Microsoft Corporation
Richard Tarapchak, VP & Controller, Navistar, Inc.
John J. Brennan, Chairman, Financial Accounting
Foundation
Stephen A. Zeff, Professor of Accounting, Rice University
Joseph D. Ament, JD/CPA, Professor of Accounting &
Taxation, Chicago, Illinois
Dr. Nigel Sleigh-Johnson, Head of Financial Reporting
Faculty, ICAEW, London, United Kingdom
Paul V. Stahlin, CPA, Chairman of the Board, and Barry
Melancon, CPA, President and CEO, American Institute of
Certified Public Accountants
Allan Cohen, Chair Financial Reporting Committee,
Institute of Management Accountants
Jeffrey P. Watson, CPA Chair, and Scott G. Lehman, CPA
Vice-Chair, Accounting Principles Committee of the
Illinois CPA Society
Cynthia M. Fornelli, Executive Director, Center for Audit
Quality
Anne Simpson, Senior Portfolio Manager, California
Public Employees Retirement System (CalPERS)
Jeff Mahoney, General Counsel, Council of Institutional
Investors
Donna J. Fisher, Senior Vice President, Tax, Accounting
and Financial Management, American Bankers Association
Tom Quaadman, Vice President, Center for Capital
Markets Competitiveness, US Chamber of Commerce
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ACCY 331 – Spring 2012
IFRS Project – Part II
Instructions
Purpose:
In recent years, many accounting standard setters, regulators, company leaders and market
participants have set a goal of achieving a single set of high-quality, common accounting
standards used around the world. The purpose of Part II of this project is to increase your
knowledge of the Security and Exchange Commission’s (SEC’s) evolving efforts in deciding
whether and how to incorporate IFRS for U.S. issuers.
You will work as an individual on this part of the project. (An open-book test administered
online via Blackboard course management software, with one attempt per student.) Two source
documents will be needed to answer the questions in this test: "An Analysis of IFRS in Practice"
and "A Comparison of U.S. GAAP and IFRS." Both were issued on November 16, 2011, and
both are located on the SEC website under “Spotlight on Work Plan for Global Accounting
Standards” at http://www.sec.gov/spotlight/globalaccountingstandards.shtml
Point value: 40 points
1. (2 points) This is an individual assignment. By checking the "agree" box below, you are
certifying that you have/will not discuss the assignment with anyone other than Professor
Matuszewski.
a. Agree
b. Disagree
An Analysis of IFRS in Practice
2. (2 points) The analysis of IFRS in practice is based on a sample of 183 companies on the
2009 Fortune Global 500 list that make their financial statements available in
English. What form of IFRS did a company have to follow to be included in the sample?
a. IFRS (without qualifiers)
b. IFRS as issued by the IASB
c. IFRS as adopted by the European Union
d. IFRS as adopted in Australia
e. The sample included financial statements under all of these forms of IFRS.
3. (2 points) In your own words, briefly describe the two themes that emerged from the
Staff's analysis.
4. (2 points) The analysis revealed that some companies used terms that were inconsistent
with the terminology in the applicable IFRS. Because the analysis was conducted using
English-language translated financial statements published by the companies, the SEC
concluded that the differing terminology resulted from translation differences.
a. True
b. False
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5. (2 points) In selecting the accounting policies to apply to transactions IFRS requires that
management consider the following items. Indicate the order in which they must be
considered, from first to last.
a. The guidance in an IFRS standard that specifically applies to the issue.
b. The recent pronouncements of other standard setting bodies that use a similar
conceptual framework, if they do not conflict with IFRS.
c. The guidance in an IFRS standard that relates to similar issues.
d. The IFRS Framework.
6. (2 points) If a company considers the recent pronouncements of other standard-setting
bodies in determining how to account for a transaction, IFRS requires that the company
must monitor subsequent changes to those pronouncements, and incorporate those
changes in their future accounting.
a. True
b. False
7. (2 points) The SEC identified considerable diversity in the level of detail in descriptions
of accounting policies in the financial statements they reviewed. Identify five of the
common examples of topical areas with unclear accounting policy disclosures that were
listed.
8. (2 points) The SEC observed that several companies presented required disclosures
outside the financial statements; however, it was always made clear that these required
disclosures were audited.
a. True
b. False
9. (2 points) IFRS permits companies to elect either a cost model or a revaluation model to
account for property, plant and equipment after initial recognition. The cost model was
elected by the vast majority of companies in the sample.
a. True
b. False
10. (2 points) IFRS requires disclosure of revenue recognition policies. List the industries in
which the SEC indicated that unclear revenue recognition policy disclosures were
prevalent.
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11. (2 points) The SEC summarized its observations regarding its reviews of the most recent
SEC filings of approximately 140 foreign private issues that are registered with the SEC
and that prepare their financial statements in accordance with IFRS, and prepared a chart
showing the most frequent areas of comment. Rank the areas shown below in decreasing
order from highest percentage of registrants issued comments to lowest.
a. Income taxes
b. Financial statement presentation
c. Property, plant and equipment
d. Revenue recognition
e. Operating segments
f. Consolidation, associates and joint ventures
g. Provisions and contingent liabilities
h. Financial instruments
i. Employee benefits
j. Impairment of assets
false
12. (2 points) Briefly describe how the findings in "An Analysis of IFRS in Practice" have
influenced your personal opinion about whether the SEC should incorporate IFRS as the
set of accounting standards to be used by U.S. public companies.
A Comparison of U.S. GAAP and IFRS
13. (2 points) Compared with U.S. GAAP, IFRS may help promote broader consistency
across industries because of its limited industry- or transaction-specific guidance.
a. True
b. False
14. (2 points) U.S. GAAP has extensive guidance for evaluating materiality, while IFRS has
only limited guidance.
a. True
b. False
15. (2 points) Briefly describe three specific differences between IFRS and U.S. GAAP with
respect to accounting for inventory.
16. (2 points) IFRS requires the use of a revaluation model for capitalized acquired
intangibles. Under this model, acquired intangibles are periodically adjusted to fair
value, as determined in an active market.
a. True
b. False
17. (2 points) When an item of property, plant and equipment has multiple parts, IFRS
requires that each significant part be assigned a separate useful life, and be depreciated as
if it was a separate asset.
a. True
b. False
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18. (2 points) The liability referred to as an asset retirement obligation under U.S. GAAP is
referred to as a decommissioning liability under IFRS. Despite the different terms, both
initial and subsequent measurement of this type of liability is the same under U.S. GAAP
and IFRS.
a. True
b. False
c.
19. (2 points) Both U.S. GAAP and IFRS require that a loss contingency be recorded when a
future economic outflow is probable. When a continuous range of equally possible
outcomes exists, IFRS requires that the loss be recorded as
a. the low end of the range.
b. the mid-point of the range.
c. the high end of the range.
d. any value within the range.
20. (2 points) Both U.S. GAAP and IFRS require that research and development costs are
expensed as incurred.
a. True
b. False
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