Ex-SEC secretary says US switch from GAAP to international standards is 'inevitable'
Former SEC secretary of 20 years Jonathan Katz took centre stage at a seminar on the latest hot international regulatory topics held in Bermuda yesterday.
Mr. Katz talked about the Securities and Exchange Commission's (SEC) initiative to switch from US accounting standards (GAAP) to international standards (IFRS).
He also touched upon the recommendations of the SEC Advisory Committee on improving financial reporting and possible changes in its own reporting, and the most current proposals by US Treasury Secretary Henry Paulson.
He was joined by Rob Blake, senior director of Interactive Services, who spoke of the XBRL (eXtensible Business Reporting Language) business technology system and how it links in with the SEC, at the meeting hosted by the Bermuda Stock Exchange (BSX) and financial, marketing and business communications service provider Bowne at the Fairmont Hamilton Princess.
The seminar, which focused on the regulatory changes and issues facing the financial industry, was kicked-off by the BSX's president and CEO Greg Wojciechowski, with Mr. Katz explaining that his visit to the Island was a chance to discuss what is currently going on in the US financial markets and find out about the latest developments at the BSX.
His previous dealings with Bermuda, he added, had included trying to resolve a dispute between the Bacardi family over who owned the company's stock, when at the SEC. Mr. Katz said the first issue was whether the US should discard GAAP and align itself with most of the rest of the world and the IFRS accounting standards, a matter which he believes will inevitably happen.
"There really is a very strong consensus that the US has to do this — there is really an inevitability about it, it is just a matter of timing," he said.
"Everybody seems to be in agreement."
He claimed the main problem was a lack of professional experts in IFRS in the US and he called on American universities to offer courses and training to address this issue.
Mr. Katz said the secondary problem with the changeover to IFRS was the ability of countries to modify the IFRS standards to reflect their environment and if they tinker with them too much there would be no true global standards.
"I think in the near-term it is going to be very difficult for the US business community to adjust to a free accounting system," he said. "It is going to require a huge change in the way the business community does business.
"It is going to come to the US, but it is going to take more time."
He also touched on the what is being proposed in the near future by the SEC Advisory Committee on financial reporting.
Then Mr. Katz talked about the recently issued report from the US Department of Treasury on the proposed changes to financial regulation.
"Overall, I think they will move forward in the rule-making process and a small number of companies will adopt IFRS," he said.
"I don't see much coming out of the Paulson report and changing the regulatory structure."
Mr. Blake then introduced the XBRL programme and its applications for filing financial reports.
The system, which was officially launched in 2005 and is essentially a computer language for the electronic communication of business reporting and financial data, he explained, was merely a variant of the current widely-used XML (eXtensible Markup Language) system, while it can be used as a cross platform across different formats, and is both Internet-friendly and up to global standards.
"What it is doing for the business reporting community is pretty exciting," he said.
"The SEC will issue a Sunshine Act notice on Monday in Washington DC and there will be an SEC open meeting to consider a possible role for interactive data, also known as XBRL."