SEC Commissioner discusses the 'roadmap'

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19 Mar 2006

In her remarks before the Institute for International Bankers Annual Conference in Washington on 13 March 2006, US SEC Commissioner Annette L.

Nazareth discussed "the prospect of convergence of US and EU accounting standards". Her comments addressed the adoption of International Financial Reporting Standards as the single accounting standard in the EU and the principles underlying the 'roadmap' by which the Commission is considering accepting IFRS as a primary accounting system without requiring reconciliation to US GAAP. Click to download (PDF 53k). An excerpt:

How the Commission arrived at a reconciliation requirement is rooted in two fundamental policy considerations. One is consistency, that is, the investing public in the United States needs the same type of basic information disclosed for an investment decision regardless of whether the issuer is foreign or domestic. This view suggests that foreign registrants be subject to exactly the same requirements as domestic ones. The other policy consideration is that it is in the public interest to permit US investors the opportunity to invest in a broad array of securities, including foreign securities. This suggests that the Commission avoid overly burdensome requirements on foreign issuers. According to this reasoning, the public interest would be better served by encouraging foreign issuers to register their securities with the Commission.

These same considerations are at the heart of the determination of a reconciliation requirement. Thus the roadmap focuses on whether foreign private issuer financials prepared under IFRS, without reconciliation to US GAAP, will achieve the goal of opening our markets further while remaining consistent with the objective of providing disclosure of comparable quality, transparency, and usefulness.

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