RegulationAccounting StandardsSEC move fuels IFRS takeover

SEC move fuels IFRS takeover

SEC gives IFRS a huge boost, as US-listed companies are told they don't have to reconcile to US GAAP

The relentless march of International Financial Reporting Standards took a
huge leap forward last week, after the
Securities and Exchange
Commission
announced that it would drop the requirement for foreign-listed
companies to reconcile to US GAAP.

The move will prompt a full-scale rush in the US to brush up on the
international standards, where there are few professionals up to speed on the
standards.

But experts warned that the moves, though welcome, could still prompt
difficulties for UK companies since the variety of IFRS allowed by the SEC is
still different from that used in Europe.

There are fears that the move could create problems for those analysing
accounts. Former SEC chief accountant Lynn Turner earlier this month said there
was ‘just about no professors teaching IFRS… and almost no professors who
themselves have a working knowledge of IFRS [in the US]’.

Desmond Wright, the ICAEW’s corporate reporting manager, added: ‘There is
also a question of audit quality, in that US audit firms will need to undertake
some additional staff training in applying IFRS.

‘However, we believe that there is sufficient experience both within the US
and internationally to ensure that audit quality will be maintained, although we
acknowledge that additional costs will initially be incurred.’

UK companies may still have to carry out significant work to reconcile
themselves to the full IFRS that the SEC is insisting on. European Union
companies use a local variant of the standards.

Tom Quinn, a partner in the capital markets group at PricewaterhouseCoopers,
said: ‘It is entirely possible that companies might have to prepare two sets of
numbers in future (EU and a full IFRS) if they drop the US GAAP reconciliation.

‘There are also issues around managing analyst expectations and about issuing
securities before the next annual report is published.’

US companies may also have the option of moving to IFRS in 2009.

Mary Tokar, head of KPMG’s international financial reporting group, said the
SEC’s decision was a major step forward in confirming the role of IFRS as the
global platform for financial reporting.

‘This ruling is a welcome signal confirming the SEC’s commitment to IFRS, and
suggests that it will continue to move forward the debate on its proposal to
permit US companies to use IFRS,’ she said.

Related Articles

Demystifying GDPR for accountants

Accounting Standards Demystifying GDPR for accountants

1w Ellen Temperton, Lewis Silkin
EY fined £1.8m over Tech Data audit

Accounting Standards EY fined £1.8m over Tech Data audit

2m Emma Smith, Managing Editor
The great professional services shake-up

Accounting Standards The great professional services shake-up

3m Fergus Payne, Lewis Silkin
What do clients actually want from an accountant?

Accounting Standards What do clients actually want from an accountant?

4m Emma Smith, Managing Editor
Accountants shouldn’t neglect hybrid mismatch anti-avoidance rules

Accounting Standards Accountants shouldn’t neglect hybrid mismatch anti-avoidance rules

4m Alison Conley
Membership of the accountancy profession on the rise

Accounting Standards Membership of the accountancy profession on the rise

5m Alia Shoaib, Reporter
The real price of mates' rates in the provision of professional services

Accounting Standards The real price of mates' rates in the provision of professional services

5m DAC Beachcroft
IASB overhauls insurance accounting with issuance of IFRS 17

Accounting Standards IASB overhauls insurance accounting with issuance of IFRS 17

7m Alia Shoaib, Reporter