SEC Issues Final Rules on IFRS Reconciliation

The Securities and Exchange Commission has issued a final rule on accepting financial statements prepared by foreign companies in accordance with International Financial Reporting Standards without reconciling them with U.S. generally accepted accounting principles.

The SEC noted that it was accepting the statements prepared in accordance with IFRS as issued by the International Accounting Standards Board, which would leave out regional variations such as those approved by the European Union. The SEC said, "Current requirements regarding the reconciliation to U.S. GAAP do not change for a foreign private issuer that files its financial statements with the commission using a basis of accounting other than IFRS as issued by the IASB."

The SEC acknowledged that it had received comments suggesting that the commission also accept financial statements prepared using jurisdictional adaptations of IFRS without a U.S. GAAP reconciliation, as well as jurisdictional adaptations of IFRS with a reconciliation to IFRS as issued by the IASB, or any home country GAAP with a reconciliation to IFRS as issued by the IASB.

The foreign companies that take advantage of the new rule will need to state in the notes to their financial statements that they are in compliance with IFRS as issued by the IASB and provide an auditor's report that gives an opinion on that compliance.