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SEC Commissioner backs IFRS adoption, discusses possible 'opt out' for issuers

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30 Jun 2011

United States Securities Exchange Commission (SEC) Commissioner Kathleen L. Casey has supported the adoption of IFRS in the United States in a recent speech.

Giving the keynote address at the Society of Corporate Secretaries and Governance Professionals 65th Annual Conference in Colorado, United States on 29 June 2011, Ms Casey highlighted the benefits of IFRS adoption. Topics covered included the benefits of a single set of high-quality global accounting standards in increasingly global capital markets, the impacts of more United States entities investing in entities that report in accordance with IFRSs, the United States' influence on IFRS development and cost and other concerns raised by constituents.

Ms Casey also discussed the possibility of an 'opt out' for issuers, perhaps on a permanent basis. An extract follows:

While I believe that the United States must provide for reporting under IFRS by U.S. issuers, I believe that we can and should give some issuers the option to continue to report under U.S. GAAP.

One of the concerns that has been expressed since we first issued the "Road Map" in November 2008, from smaller reporting companies and other companies that have no international operations or aspirations, is that the transition to IFRS will be burdensome and impose costs without providing them with any commensurate benefits. I understand these concerns, and it makes sense, in my view, to allow these issuers to opt out of IFRS, at least initially, if not permanently. Providing optionality would preserve the benefits of IFRS, ensure continued U.S. influence in the development and preservation of IFRS, and avoid unnecessary costs for smaller U.S. issuers.

Some commentators object to providing optionality on the basis that it would lead to a "two-GAAP" world. My response is that we are already in a two-GAAP world. The Commission already permits foreign private issuers to report using IFRS. Furthermore, in light of the global nature of our capital markets, investors, public accountants and other market participants already need to know both U.S. GAAP and IFRS.

Click for full text of the speech (link to the SEC website).

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