For several years, the Securities and Exchange Commission (SEC) has been considering whether to transition U.S. firms to International Financial Reporting Standards (IFRS) for filing public financial reports.
During 2011, Matthew J. Foehr, the vice president and comptroller for Chevron Corporation, sent comment letters to both the Securities and Exchange Commission (SEC) and the International Accounting Standards Board (IASB), stating, "Chevron would object to any plan to incorporate IFRS into U.S. GAAP if it would result in a significant income-tax penalty for our company."37
In its 2012 Annual Report, Chevron reports:
Inventories
Crude oil, petroleum products and chemicals inventories are generally stated at cost, using a last-in, first-out method. In the aggregate, these costs are below market. "Materials, supplies and other" inventories generally are stated at average cost.
Required:
1. Why might Mr. Foehr be concerned that IFRS would trigger a "significant income-tax penalty" for Chevron?
2. Comment letters and business press articles that discuss LIFO inventory method issues with IFRS transition suggest that these potential problems could be addressed or fixed by any of the following agencies: U.S. Congress, SEC, or the IASB. Explain what type of actions each of these bodies might take to remedy concerns like the one posed by Mr Foehr.