Furthering its efforts to establish a global accounting standard, the SEC plans to issue a proposed rule this summer allowing foreign private issuers to choose between International Financial Accounting Standards (IFRS) and U.S. GAAP. To create a level playing field, the Commission plans to issue simultaneously a concept release to garner feedback on whether it should adopt a standard allowing U.S. companies to use IFRS. Comments on both releases are due in the fall.
The SEC is proposing that by 2009, “foreign companies who prepare financial statements in accordance with International Financial Reporting Standards who file those financial statements in the U.S. do not have to include a reconciliation to U.S. GAAP,” which is costly, says Fred Gill, senior technical manager, accounting standards at the AICPA. It’s important to note that foreign companies registered with the SEC already have the ability to file with the Commission on either IFRS or U.S. GAAP, or any other comprehensive basis of accounting, says David Kaplan, head of international accounting and SEC services at PricewaterhouseCoopers. But as it stands now, if a foreign issuer registered with the SEC files under international standards, and not U.S. GAAP, the SEC requires that the company reconcile their financial statements to U.S. accounting standards, Kaplan explains. The proposed rule, however, would exempt these companies from reconciling to U.S. GAAP.