Recommendations for a National Agenda

Critically important near-term priorities

• 1. Provide clearer guidance for implementing the Sarbanes-Oxley Act
• 2. Implement securities litigation reform
• 3. Develop a shared vision for financial services and a set of supporting regulatory principles

Initiatives to level the playing field

• 4. Ease restrictions facing skilled non-US professional workers
• 5. Recognize IFRS without reconciliation and promote the convergence of accounting and auditing standards
• 6. Protect US global competitiveness in implementing Basel II

Important longer-term national priorities

• 7. Form a National Commission on Financial Market Competitiveness
• 8. Modernize financial services charters

Recommendation 5

Recognize IFRS without reconciliation and promote the convergence of accounting and auditing standards. The SEC should consider recognizing International Financial Reporting Standards (IFRS) without requiring foreign companies listing in the US to reconcile to US Generally Accepted Accounting Principles (GAAP). Similarly, the PCAOB should work with other national and international bodies towards a single set of global audit standards. Meanwhile, the US Financial Accounting Standards Board (FASB) and the International Accounting Standards Board (IASB) should continue – and, if possible, accelerate – current efforts towards the convergence of global accounting standards, aiming for a 'best-of-both' approach that balances materiality with the need to inform investors and other users of publicly reported financial information.

The accelerated convergence of two high-quality accounting standards will reduce regulatory compliance costs without undermining investor protection or impairing market information. The harmonization of auditing rules, provided that better standards win out, will similarly lower auditing costs for most public companies without reducing the quality of the statements produced.

Summary of Discussion

Public Portion of IASCF Meeting, 18 January 2007

• Financial Statement Presentation. IASB representatives explained that improvement of financial statement presentation is being done in three phases. The exposure draft of Phase A was released in March 2006, and a final standard will be issued in the second quarter in 2007. The exposure draft of Phase A allows either a single-statement approach or two-statement approach for reporting results of operations. Representatives of IASB noted that, under the two-statement approach, determining which items of income and expense should be excluded from determination of net income is arbitrary, and sometimes net income has been manipulated by financial statement preparers. Therefore, the Board would like to move to a single statement of comprehensive income and eliminate the two-statement approach – even though the two-statement approach is widely supported by industry. Some IASCF members expressed the view that both preparers and users of the financial statements are still much concerned about net income. The IASCF members advised that IASB needs to make another field survey before they reach the final conclusion to eliminate the two-statements approach and move to a single statement of comprehensive income. Representatives of IASB agreed with them.
• Conceptual Framework. Representatives of IASB confirmed that the Conceptual Framework is intended as a guide not only for the IASB in setting standards but also for preparers and users to assist them in practice how to follow the theory where no specific accounting pronouncement addresses a situation.
• Insurance. This project is now in Phase II, for which a Discussion Paper is expected in first quarter 2007. The key issue is how best to measure future cash inflows and outflows for the purpose of recognising insurance income and insurance liabilities.