SEC REMOVES RECONCILIATION REQUIREMENTWashington, D.C. - The Securities and Exchange Commission voted in mid-November to remove the requirement for non-U.S. companies to reconcile their financial statements to U.S. generally accepted accounting principles.
The SEC decided to accept financial statements prepared in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board without the need to reconcile them with U.S. GAAP. However, the SEC said that the statements would not be accepted if they conformed to variations on IFRS, such as the ones implemented by the European Union, though European companies will get a two-year exemption on meeting IASB rules on accounting for derivatives.
GAAP and IFRS have been on a path to convergence, and the decision by the SEC should help accelerate that process. The SEC has also proposed that U.S. companies be allowed to file their statements in accordance with IFRS and it has been receiving comments on that proposal from various accounting organizations and firms.
AUDIT OF IRS FINDS FAULT
Washington, D.C. - The Internal Revenue Service's financial management systems and internal controls came under sharp criticism in a financial audit conducted by the Government Accountability Office.
The GAO said that while the IRS's fiscal 2007 and 2006 financial statements were fairly presented in all material aspects, serious internal control and financial management deficiencies made it necessary for the IRS to rely on resource-intensive compensating processes to prepare its statements.
The GAO did credit the IRS with making significant strides in addressing its financial management challenges and substantially mitigating several material weaknesses in its internal controls. But problems remain with the automated systems for processing tax-related activities. The IRS has not determined how to apply the cost information that resides in its general ledger system for non-tax activities to the activities processed by its separate tax-processing systems. The GAO also said that the IRS still has issues in internal controls over hard-copy taxpayer receipts, and found that the IRS was not always in compliance with the law concerning the timely release of tax liens.
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