SEC Furthers Strides Toward Global Accounting Standard

The idea of eliminating the reconciliation requirement between International Accounting Standards and U.S. GAAP was first proposed in a 2005 Roadmap by the SEC’s then chief accountant, Don Nicoliason. Since then, American companies have questioned whether they, too, would be given the same latitude as foreign registrants in reconciling their financial statements to IFRS, Gill says. Some analysts, Kaplan says, may prefer to see the reconciliation “to compare and contrast companies on a U.S. accounting basis,” Kaplan says. But comments made by those who attended a recent SEC roundtable on the subject showed “pretty widespread support” of eliminating reconciliation.

The SEC’s concept release seeks to give U.S. companies–even those without foreign branches–a chance to reconcile their statements to IFRS. But why would a U.S. registrant want to use an international accounting standard? Besides the fact that U.S. accounting standards are more complex than foreign ones, Kaplan says, U.S. companies want to be on par with their global competitors. “The companies against which U.S. companies may be compared may be filing with the SEC or issuing their financial statements to their shareholders on IFRS,” he says. Therefore, using IFRS may put a U.S. company “on a more comparable basis of accounting as its competitors.” U.S. companies may also be able “to better explain their business results because it’s on a basis that’s comparable to other competitors around the world.”