US SEC proposes rules for transition to IFRS

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12 Mar 2004

The US Securities and Exchange Commission yesterday voted to propose amendments to Form 20-F that would affect foreign issuers that change their basis of accounting to IFRS.

Normally, Form 20-F requires a company to include in its SEC filings three years of audited financial statements prepared on a consistent basis of accounting. The proposed amendments would allow companies switching to IFRS for the first time for any financial year beginning no later than 1 January 2007, in their first year of reporting under IFRS, to include only two years of audited financial statements, with appropriate related disclosure. The SEC's News Release said:

The proposals are intended to ease the burdens that foreign companies may face when they adopt IFRS for the first time, while improving the quality of financial disclosure that they provide to investors. The proposals are addressed particularly at foreign issuers located in the European Union (EU), which under current EU law will generally be required to adopt IFRS for reporting on their 2005 financial year. The proposals are also intended to encourage other foreign companies to switch their accounting voluntarily to IFRS.

In a separate action, the Commission added 10 new items that must be reported on Form 8-K, the form used to disclose important corporate events when they occur.

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