The Securities and Exchange Commission has voted 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 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. It has been receiving comments on that proposal from various accounting organizations and firms (see SEC Gets IFRS Filing Advice).

The IASB welcomed the decision by the SEC. "We are delighted that the U.S. Securities and Exchange Commission has decided to allow non-U.S. issuers to file under IFRS without the need for reconciliation to U.S. GAAP," said Sir David Tweedie, chairman of the IASB.

The IASB has been working with the U.S. Financial Accounting Standards Board on convergence. However, last week FASB expressed some hesitations about removing the reconciliation requirements.

"The decision about whether, when and how to remove the reconcilation requirement rests with the SEC," said a letter from FASB Chairman Robert H. Herz and Financial Accounting Foundation Chairman Robert E. Denham. "However, if the requirement is removed, we believe it is very important to emphasize that a single set of high-quality international standards remains the ultimate goal and that continued progress toward that goal is expected."

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