SEC Eliminates Reconciliation Requirement for Foreign Companies; AICPA Recommends SEC Use International Accounting Standards
CPA Letter | January 1, 2008
In November 2007, the Securities and Exchange Commission (SEC) unanimously approved a proposal that no longer requires foreign registrants to reconcile their financial statements with U.S. generally accepted accounting principles (GAAP), as long as they use international financial reporting standards (IFRS) as issued by the International Accounting Standards Board (IASB). The rule amendment will be effective 60 days after publication in the Federal Register and apply to financial statements for years ended after November 15, 2007. The AICPA supported this change in congressional testimony in October 2007.
The AICPA had recommended the SEC take comprehensive steps to harmonize U.S. and international financial reporting, including allowing American public companies to report financial results using international accounting standards. The SEC is weighing whether to allow U.S. firms to report financial results using international financial reporting standards rather than U.S. GAAP. The AICPA recommended in a comment letter that the SEC gather information on the likely number of public companies that would choose to issue reports using IFRS as part of a comprehensive SEC rulemaking based on responses to its current concept release. The AICPA urged the SEC to solicit user feedback after giving U.S. issuers an IFRS option to gauge how well international accounting and reporting standards would meet U.S. investors’ information needs and determine what, if any, adjustments may be needed. The Center for Audit Quality (www.thecaq.org) also submitted a comment letter to the SEC in which it suggested that, "the Commission should develop a comprehensive plan, with appropriate timetables and a date certain, for moving all U.S. domestic registrants to IFRS."
