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Home > Articles & Research > Accounting & Audit > SEC Allows Foreign Companies Choice of Two Acconting Systems

SEC Allows Foreign Companies Choice of Two Acconting Systems

The Securities and Exchange Commission has unanimously voted to help American investors better analyze and get more readily comparable financial information from the U.S.-registered foreign companies in which they invest.

by Joseph McCafferty | November 16, 2007

The Securities andExchange Commission has unanimously voted to help American investors betteranalyze and get more readily comparable financial information from the U.S.-registered foreign companies in which they invest.

The action comes asa result of the record number of U.S. investors who own the securitiesof foreign companies, and the growing need for high-quality accountingstandards that transcend borders.

After considering lengthy and informative public comment onthe June proposal, the Commission yesterday approved rule amendments which willnow require financial statements from private foreign issuers in the United States to be accepted withoutreconciliation to U.S.Generally Accepted Accounting Principles (GAAP), only if they are preparedusing International Financial Reporting Standards (IFRS), as issued by the InternationalAccounting Standards Board.

The amendments are to take effect 60 days after they arepublished in the Federal Register and apply to financial statements coveringall ears ended after November 15, 2007.

The meaning behind the requirement to use the versionapproved by the IASB is to encourage the development of IFRS as a uniformglobal standard, which are not a divergent set of standards applied differentlyin every nation.  Consistent applying ofIFRS is meant to help U.S.investors who own foreign securities to have better comparability.

“Consistent application of international accountingstandards will help the two-thirds of U.S. investors who own foreignsecurities to understand and draw better comparisons among investment optionsthan they could with a multiplicity of national accounting standards,” SECChairman Christopher Cox said in a statement.

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