SEC staff review of IFRS financial statements

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05 Jul 2007

The US Securities and Exchange Commission has published on its website observations of the SEC staff arising from their review of the annual reports for 2006 of more than 100 foreign private issuers containing financial statements prepared on the basis of International Financial Reporting Standards.

Staff comments relate to the following matters, among others:
  • Assertion of compliance with IFRSs. "In the vast majority of the companies we reviewed, the company's auditor opined on the company's compliance with the jurisdictional version of IFRS that the company used, but did not opine on the company's compliance with IFRS as published by the IASB."
  • Manner of presentation - income statement. Issues included descriptions of subtotals in the income statement, accounting policies for excluding items from operating income, and calculation of voluntary per-share measures.
  • Manner of presentation - cash flow statement. Issues included definition of cash equivalents and presentation of expenses outside of cash flow from operations.
  • Intercorporate investments. Accounting treatments for common control mergers, recapitalisations, reorganisations, acquisitions of minority interests, and similar transactions.
  • Consolidation. Exclusion of a subsidiary from consolidation.
  • Accounting policy decisions. Basis for choosing accounting policies that are not explicitly covered in IFRSs.
  • Specialised industries. 'Substantial variation' in accounting for insurance contracts and in the reporting of extractive industry exploration and evaluation activities.
  • Accounting policies regarding revenue recognition, intangible assets and goodwill, identifying and evaluating impairment, leases, contingent liabilities, and financial instruments.
  • Banks. Recognition of loan impairments by banks.
Click to (PDF 44k). The comment letters sent by the SEC staff to the companies whose IFRS financial statements were reviewed, and the company responses, are available on the SEC website at

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