SEC may ease reconciliation for IFRS filers

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27 Jan 2005

In a speech at the London School of Economics earlier this week, US SEC Chairman William H.

Donaldson said that the Commission is considering easing certain of its rules for non-US companies listed in the United States. He indicated that European companies using IFRSs might be allowed to reconcile only two years of financial statements to US GAAP instead of three:

The Commission recognizes the seismic change that conversion to IFRS represents for many European countries. We appreciate the European Union's efforts in this area because we value the EU's willingness to require the use of a single set of high quality accounting standards. This approach enhances investor understanding. We also understand that conversion to IFRS, while undoubtedly beneficial in the long run, could be difficult and expensive for some to implement in the immediate term. Consequently, the Commission has proposed amendments to our reporting requirements that would facilitate foreign private issuers' conversion to IFRS. For those foreign issuers also listed on U.S. exchanges, the SEC has long allowed these companies to use IFRS, provided the financial figures were reconciled to U.S. Generally Accepted Accounting Principles over a three-year period. Within the next few months, I fully expect the Commission will consider adopting a proposal to allow first-time users of IFRS to reconcile their financial statements to U.S. GAAP for only two years, and I am of the firm view that this would be a step in the right direction.

Other changes under consideration include:
  • Easier rules for foreign registrants to deregister their securities if they do not wish to continue to meet the US requirements.
  • A possible delay, for non-US registrants, of the effective date of the requirements to include in their annual reports a report of management on the company's internal control over financial reporting. Currently, a foreign private issuer that files its annual report on Form 20F or Form 40F must begin to comply in its first financial year ending on or after 15 July 2005.
Click to download Mr. Donaldson's Speech (PDF 65k).

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