Update on the SEC and IFRSs

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22 Jan 2007

John W White, the Director of the Division of Corporation Finance of the US Securities and Exchange Commission, spoke about "the Commission's role in the ongoing efforts to improve financial reporting through International Financial Reporting Standards (or IFRS) and the promotion of accounting convergence" at a conference last week in London.

His remarks also touched on the Commission's proposed rulemaking concerning deregistration by foreign private issuers and its efforts to improve the implementation of the internal control reporting requirements of the Sarbanes-Oxley Act of 2002 including for foreign private issuers. IFRS-related topics about which Mr White commented include:
  • Financial reporting in an increasingly global market
  • The role of Corporation Finance in the review of IFRS filings
  • Financial reporting with IFRS
  • Convergence of IFRS and US GAAP
  • The importance of cross-border regulatory conversations
Presented below is an excerpt from Mr White's comments concerning convergence of IFRSs and US GAAP. Click to Download Mr White's Speech  (PDF 77k).

Convergence of IFRS and US GAAP

Let me turn for a moment to convergence (and our roadmap). Last year was the first year for many companies to use IFRS. The SEC staff is necessarily also gaining more experience with IFRS, and enhancing our own understanding of the accounting standards. Right now, foreign private issuers must reconcile their financial statements to US GAAP if those statements use IFRS (or another home country GAAP) in the first instance. Many of us would like to see an end to that reconciliation requirement for IFRS filings, and we have a project plan to consider that possibility by 2009. Expanded use of IFRS and the SEC staff's review of those filings (which I have been describing) is an important step in our roadmap for the end of reconciliation. The continuing convergence efforts of the Financial Accounting Standards Board in the US and the IASB are also an important step in that roadmap. It is not an important step, in fact not a step at all, that IFRS be exactly the same as US GAAP. Nor is it part of the SEC staff's roadmap that we become the arbiter of IFRS. As our comments to and correspondence with foreign private issuers that adopted IFRS for the first time last year become available on the SEC website, I encourage you to look directly at those comments and put them to the test. I believe you will see that they reflect this same mindset that I have been sharing with you today.

The SEC staff roadmap laid out a path for a possible end to reconciliation by 2009, and the staff continues to follow that roadmap and to undertake the steps it had contemplated. It's too early now to tell where it will end, but our commitment to doing our part remains as strong as ever. Part of that involves understanding the application of IFRS and understanding the effects of IFRS on investors and the U.S. markets. We are actively engaged in seeking and analyzing the information we need and that is a key project for us in 2007. We are also considering other avenues for gathering information, beyond the reviews I have described, and we may have more to say on that in coming months.

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