SEC proposes to drop reconciliation for IFRS registrants

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21 Jun 2007

On 20 June 2007, the US Securities and Exchange Commission agreed to issue a 'proposing release' that would eliminate the requirement to reconcile financial statements to US GAAP if the financial statements are in full compliance with the English language version International Financial Reporting Standards (IFRSs) as published by the International Accounting Standards Board.

This proposed approach would give foreign private issuers a choice of using IFRSs without reconciliation, US GAAP, or their local GAAP reconciled to US GAAP in preparing financial statements that are filed with the SEC either in a registration statement or an annual report. The changes would apply starting with their 2008 annual reports, which would be filed in 2009. The release is expected to be posted within the next week or so and will have a 75-day comment period. Michael D Coco, Special Counsel in the SEC's Office of International Corporate Finance, outlined the proposal to the Commission. Click to Download Mr Coco's Remarks(PDF 37k). Also, the SEC is expected to issue during the next several months a 'concept release' targeted at US domestic issuers. That release will invite comments on whether US issuers should be permitted to use IFRSs in preparing their financial statements. On the basis of the feedback it receives, the Commission will consider whether to issue a proposing release changing the requirements for domestic companies. That release could come in 2008 or 2009.

In a Press Release (PDF 43k), Sir David Tweedie, IASB chairman, commented on the importance of the SEC decision:

The SEC's proposal shows its recognition of the tangible benefits of a single set of financial reporting standards used in the world's integrating capital markets and the relevance of the continuing IASB-FASB convergence process to the economies of the US and the rest of the world. If approved, the rule will eventually reduce significantly the barriers to capital flows between countries using full IFRSs and the United States. We appreciate the SEC's continued support of our work. Our ultimate aim at the IASB is to have a single set of accounting standards used worldwide. The SEC's proposal is an important step in achieving that goal, but much work remains to be done.

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