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Report recommends US recognition of IFRSs

  • United States (old) Image

24 Jan 2007

A study commissioned by political leaders in New York City suggests that New York is in danger of losing its status as the world financial centre within ten years without a major shift in regulation and policy.

The study warns that New York financial markets are becoming stifled by stringent regulations and high litigation risks and are in danger of losing businesses and high-skilled workers to overseas competitors. The report identifies eight high-priority goals as a 'national agenda' – including recognition of International Financial Reporting Standards. Click to Download the Full Report (PDF 1,756k):

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.

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