The Securities and Exchange Commission is expected to drop the requirement for foreign companies that list on exchanges in the U.S. to reconcile their financial results to U.S. generally accepted accounting principles.
Conrad Hewitt, chief accountant of the SEC, and John White, head of the division of corporate finance at the SEC, told attendees at a Financial Executives International conference that the SEC would accept statements that conformed to the International Accounting Standards Board's version of International Financial Reporting Standards, but not to the exceptions approved by the European Union.
"We're not looking to accept a jurisdictional version of IFRS," said White, according to Reuters. "The issuer will have to unreservedly and explicitly state, and their auditors as well, that they are using the IASB version."
The SEC commissioners will vote Thursday on a timetable for lifting the reconciliation requirement.
The move is expected to accelerate the convergence between IFRS and U.S. GAAP. Randy Fletchall, chairman of the American Institute of CPAs and a partner with Ernst & Young, backs the idea of convergence. Both Ernst & Young and the AICPA have sent comment letters to the SEC encouraging the commission to allow U.S. companies to submit financial statements in IFRS.
"The ultimate goal ought to be a single set of high-quality accounting standards used around the world," he said. "I believe they will issue a rule to allow foreign issuers to file without reconciliation to U.S. GAAP, and it seems like a natural second step to allow U.S. issuers to have that option."
Fletchall does not believe that many companies will be able to manage the transition right away. While the AICPA comment letter to the SEC did not stake out a position on setting a transition date for U.S. companies, the Ernst & Young letter did recommend that the SEC set a specific date. "We think setting a date now will give people the impetus," said Fletchall.
He is in favor of a single set of global standards without exceptions for various jurisdictions like Europe or the U.S. Fletchall thinks the accounting standard change should apply to public companies first, with consideration given to private companies at some point in the future. "For now people are leaving that one alone," he said.
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