When the document refers to IFRSs, it includes not only IFRSs as issued by the IASB but also:

• IFRS as adopted by the European Union
• Australian GAAP (which incorporates Australian equivalents to IFRS)
• Hong Kong Financial Reporting Standards
• South African GAAP (which closely follows IFRS)

"This does not mean that the firms endorse departures from IFRS as issued by the IASB. Ideally, the firms would prefer all countries adopting IFRS to do so without variation. But the firms recognise the practical reality that these limited differences in IFRS frameworks exist."

International Financial Reporting Standards

This is a big one. Last Tuesday (on February 13, 2007), the Commission issued a press release announcing a staff roundtable we have coming up on International Financial Reporting Standards ('IFRS') as promulgated by the International Accounting Standards Board (the 'IASB') The roundtable will explore where things stand today with the so-called 'roadmap' laid out by then-Chief Accountant Donald Nicolaisen as to how we might eliminate the requirement that companies filing IFRS financial statements reconcile those with US GAAP The roundtable will be held on Tuesday, March 6, at the Commission's headquarters in Washington.

The Division of Corporation Finance has already been extremely busy reviewing filings from foreign private issuers that use IFRS. I detailed that review and where we stand with our growing understanding of IFRS in a speech I gave last month in London, and I do not have the time to go into that much detail here today. Suffice it to say, the recognition and growing use of IFRS is an exciting topic today and something we should all keep in focus. I believe the Commission and the staff will be devoting considerable attention and energy following the March 6 roundtable to developing and announcing next steps, and I believe the time when the staff will recommend the 'end of reconciliation' is clearly in sight.

Inconsistent application

With regard to inconsistency, the true benefit of IFRS can only be realised through enabling a better comparison of similar entities across national boundaries, which, in turn, will provide enhanced transparency for markets and a more efficient global capital market. We also acknowledge that, under a principles-based accounting framework, there may be relevant economic and legal differences between countries such that similar transactions might legitimately be reported in different ways. However, should local custom or national interest operate to threaten the consistent application of IFRS, much of this anticipated benefit could be lost.

IASB Framework

For the development of the IFRS framework itself, there are concerns that the standards in some areas are of lesser quality than those that they have replaced. There is also a growing concern that IFRS will be interpreted and audited in a more prescriptive and rules-based way than was typically the case under UK GAAP – a risk of more 'form-over-substance' when agreeing accounting treatments. Going forward, the main areas of concern arise, in part from convergence with US GAAP and in part from the move towards 'decision usefulness' and an increasing emphasis on fair-value accounting.... Should the move towards fair value for all assets and liabilities advance significantly, many question whether the resulting information would remain sufficiently reliable to enable investors to make informed decisions about the effectiveness of the stewardship of their companies. At the same time, the ability of the audit profession to apply judgement on what constitutes a 'true and fair' view might be ever more constrained by detailed rules, resulting in a 'presents fairly in accordance with' model of financial reporting. The progress made over the next 18 to 36 months will be critical in determining whether the potential benefits of IFRS and convergence are realised, or whether the costs connected and the ultimate outcomes experienced are potentially disproportionate, or even negative, for UK stakeholders.