US domestic companies use IFRSs?

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24 Apr 2007

In his remarks earlier this month at the 32nd Annual Conference of the International Organization of Securities Commissions (IOSCO) in Mumbai, US SEC Commissioner Roel Campos spoke about the possibility that the SEC would permit or even require US domestic companies to use IFRSs.

He also expressed some concern that most of the foreign SEC registrants that had been expected to submit IFRS financial statements for 2005 had, instead, submitted financial statements that are identified as conforming to "home country adaptation of IFRSs". Click to download the Remarks of Commissioner Compos (PDF 62k). Presented below are excerpts relating to both matters:

US companies using IFRSs?

The good news is that the SEC is absolutely committed to doing what we can to facilitate meeting the goals of roadmap. To reiterate my theme, I think there has been increased focus on the roadmap given the fact that globalization issues have moved to the forefront over the past year. From the standpoint of the US, we hosted an IFRS roadmap roundtable at our SEC headquarters a few weeks ago. It was designed in large part to raise the profile of the roadmap in the US. At the roundtable, our Chairman Chris Cox and EU Internal Markets Commissioner Charlie McCreevy both affirmed their commitment to eliminating the need for reconciliation between IFRS and US GAAP. So, the US is serious about the roadmap and the timeline, and we're trying to make it work.

I should also point out some provocative new ideas that were bandied about at the roundtable. These ideas definitely moved beyond the main topic about when the SEC would accept IFRS financial statements without reconciliation. In particular, there was a discussion about whether US companies – not just foreign private issuers – should be given a choice to use IFRS or US GAAP. Given that the roadmap contemplates that foreign private issuers have such a choice, it certainly raises a legitimate question about whether US companies should also have that choice. Interestingly, when the question was put to Don Nicolaisen, who was spurred on by Chairman Cox, he responded by stating that the SEC should consider requiring that all US companies use the same standard as foreign companies, and not merely giving them a choice.

Conforming to home country adaptations of IFRSs

In many cases, financial statements prepared in accordance with home country adaptation of IFRS did not also contain a reference by both the company and its auditor that the financial statements also complied with IFRS in the form issued by the IASB. Indeed, the roadmap contemplated that we would see filings of financial statements prepared using IFRS as promulgated by the IASB. However, various jurisdictions have not accepted IFRS exactly as promulgated by the IASB, and have instead made various changes thereto. Consequently, we have seen filings containing financial statements based upon national jurisdictional adaptations of IFRS. These financial statements certainly fit within the SEC's filing requirements, but without the reference to IFRS as promulgated by the IASB, they do not appear to be financial statements that fit under the one set of global accounting standards that we wrote about in the roadmap.

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