International Accounting Rules for Foreign Firms OK'd
WASHINGTON, Nov. 17 (Reuters) -- The US Securities and Exchange Commission on Thursday unanimously voted to allow foreign companies to use international accounting standards instead of US rules when filing data with the agency.
Foreign companies listed on US exchanges will be able to choose between International Financial Accounting Standards (IFRS) or US Generally Accepted Accounting Principles (GAAP), for fiscal years ending on or after Nov. 15.
The SEC move means foreign companies can cut costs by no longer having to convert or reconcile the international accounting standards to US GAAP style.
It also aligns the United States with the European Union and dozens of other countries that require the principles-based IFRS accounting style.
"The trend toward global investing ... makes it clear that we need accounting standards that work across borders," SEC Chairman Christopher Cox said at an open meeting.
Foreign companies will have to use the version of IFRS crafted by the International Accounting Standards Board (IASB), not variations of the rules.
However, there is one exception: For firms that use a different version of IFRS for a derivative accounting standard, IAS 39, the SEC will provide for a two-year transition period.
The EU's internal market and services commissioner, Charlie McCreevy, applauded the SEC change and said it will benefit EU companies listed in the United States by doing away with costly reconciliations between standards.
Commissioners Paul Atkins and Annette Nazareth spoke favorably about the amended rule, but raised questions about the consistent application of the international standards.
John White, director of the SEC's corporation finance unit, said the division would review companies that file in IFRS the same way it reviews all firms. He pointed out that the division has been actively reviewing companies using IFRS for the past two years and said staff has had the opportunity to see how the companies respond to its comments and queries. …