to Mull Letting U.S. Companies Use International Accounting
By David Reilly
The Wall Street Journal
Wednesday, April 25, 2007
The Securities and Exchange Commission said it will consider
allowing U.S. public companies to choose which type of
accounting standards they use to report financial results, a
move some believe could one day spell the end of U.S. generally
accepted accounting principles, or GAAP.
The commission said it will begin soliciting comments this
summer on a possible change allowing foreign companies
registered with it to file financial results using international
financial reporting standards, or IFRS. Currently, foreign
companies that file with the SEC must reconcile their results to
U.S. GAAP, a costly and time-consuming process that many
companies, especially in Europe, want to do away with.
If the commission changed the rules to give foreign companies a
choice, it would also have to consider whether U.S. companies
shouldn't be able to choose between U.S. and international
rules, according to the SEC. The announcement marks a "critical
step" toward allowing U.S. companies to use international rules,
John White, head of the agency's divisions of corporate finance,
SEC Chairman Christopher Cox said the agency remains committed
to removing the reconciliation requirement by 2009. Such a move
was the subject of an SEC roundtable and is being closely
watched by European Union officials.
Currently, U.S. companies are required to report results
following U.S. GAAP. Giving companies a choice between
accounting rules could spell the end of a U.S.-based accounting
system, some accounting experts believe. The reasons:
International standards, which emphasize broad-based principles
over detailed rules, are seen as giving companies greater
flexibility; also, many multinational companies will be using
international standards for subsidiaries in foreign companies
and would rather have one accounting system globally.
Some experts don't think a move away from U.S. GAAP would
necessarily be bad. "We should get seriously behind
international accounting standards because we have something to
offer their development and they're being used increasingly in
every other part of the world," said Don Nicolaisen, a former
SEC chief accountant who put together a road map for the agency
to follow in looking to converge global accounting standards.
In fact, Mr. Nicolaisen believes the SEC should eventually dump
U.S. GAAP altogether and require the use of international rules,
as many countries already do. "I think it would be a mistake
for us to miss the boat by being the only nation with our own
brand of accounting," he added.
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