The Securities and Exchange Commission said on Wednesday that it still hoped to agree to the move of American companies to international accounting standards by the end of 2011, but it laid down a series of conditions for its approval.
The S.E.C. chairwoman, Mary L. Schapiro, appeared to be trying to reassure Europe that the United States was still on course to make the change, while at the same time satisfying critics of international standards by saying the move would not happen until more progress was made on getting American and international standards to converge.
The commission also directed its staff to first address a series of questions, including some that are sensitive in Europe, like whether the standards are being applied and enforced uniformly across all countries using them and whether American auditors are ready for the change. In addition, the S.E.C. staff was directed to consider several potential problems, like the impact of changes on “contractual arrangements, corporate governance considerations and litigation contingencies.”
Even if the S.E.C. does issue its order by the end of 2011, the commission said it would give companies until at least 2015 to make the change.
The vote to issue the statement was unanimous, but comments from the commissioners indicated varying degrees of support for an eventual adoption of international standards. Commissioner Troy A. Paredes said questions needed to be answered regarding whether the benefits of the change would be worth the cost for companies that would have to revise accounting systems and retrain personnel.
If, as the S.E.C. wants, American and international standards have largely converged before the end of 2011, those costs could be lower than they would be now.
Under the commission’s previous chairman, Christopher Cox, the S.E.C. proposed an ambitious road map for moving to international standards. That has already allowed foreign companies that use the standards in their home countries to use them in their United States filings as well, without reconciling them to Generally Accepted Accounting Principles, or GAAP.
Some American critics of the commission said it should not have allowed such use of the international standards until it was satisfied about issues like uniform enforcement and interpretation. Other countries, however, particularly in Europe, have demanded the United States move quickly to adopt international standards. Without a commitment from the S.E.C., some have suggested that there is no need for international and American boards to pursue convergence of standards. The S.E.C. wants to see that convergence completed before it makes a final decision.
Ms. Schapiro said the commission move was consistent with its previous decisions, but her level of enthusiasm seemed to be well below that of Mr. Cox. “As was the case when the commission proposed the road map in November 2008, we do not have all the information necessary to make these decisions today,” she said. “But we remain on a steady path to be in the position to make such a determination in 2011.”
Investors have long supported a uniform global set of accounting standards, which could make it easier to compare financial statements. But national attitudes to the idea have varied.
The S.E.C. said its staff would report on several issues over time, including progress on “ensuring that accounting standards are set by an independent standard-setter and for the benefit of investors.”
In the United States, there is strong support for letting accounting standards be set by a group of experts as free as possible from political influence, although in practice that does not always happen. Last year the Financial Accounting Standards Board, which sets United States standards, was forced to modify some rules affecting banks after the bankers complained to Congress.
In much of Europe, there is the opposite concern — that the I.A.S.B. is not “accountable” enough to governments. The European Commission has allowed European banks to opt out of part of one accounting standard, after heavy lobbying by the French government and banks.
While the major accounting firms have been strong supporters of moving quickly to international standards, many American companies have been more hesitant, fearing the cost of the change. In addition, some investor representatives have worried that international standards, which are often less detailed than American standards, could make it easier for companies to skirt standards they find inconvenient.
The commission appeared to be responding to those concerns when it said its criteria would include determining whether the international standards are “sufficiently developed and consistent in application for use as the single set of accounting standards in the U.S. reporting system.”
Reacting to the S.E.C. action, Jeroen van Paassen, a partner in PricewaterhouseCoopers who is leading the international standards effort in the United States, said, “We think it is positive the S.E.C. continues to discuss this in a thoughtful way.” He said the S.E.C.’s list of issues to be considered showed “they are addressing the concerns raised in the comment letters.”
Thomas Jones, a former vice chairman of the I.A.S.B. who now directs the Center for the Study of International Accounting Standards at Pace University in New York, said the decision was not a surprise. “This is a logical process,” he said. “But it is slow.”
The Cox commission had contemplated allowing American companies to move to international standards before they were required to do so. That was seen by some as a sign that the decision had already been made, since companies that converted would be left in a difficult position if international standards were not later required for all American companies.
On Wednesday, the commission dropped the idea of allowing such early adoption, but it said it might raise the issue again at a later date.
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