The Securities and Exchange Commission has released a so-called “road map,” that would allow European companies to sell securities in the U.S. without having to rework their financial statements.
Currently, companies that follow International Financial Reporting Standards must reconcile their financial reports that are filed with the SEC so that they meet U.S. generally accepted accounting principles. The SEC announced last week that the change could be in place by 2009, or even 2007.
Sir David Tweedie, the chairman of the International Accounting Standards Board, called the agreement "a big move toward global standards," in an interview with the New York Times. He said the board and the American rule maker, the Financial Accounting Standards Board, met in London on Thursday and agreed to proceed with the road map.
One issue that has not been settled is that the European Commission wants the 25 EU nations to be able opt out of complying with some portions of the international rule on derivative securities.
SEC Chief Accountant Donald T. Nicolaisen told the Times said that the SEC would require any company that opted out to disclose what its results would have been under the full rule. He also said the SEC would likely require a reconciliation if the opt-out were still in effect by the time the SEC accepted international rules.
Nicolaisen, in the Journal of International Law and Business from Northwestern University, recently wrote about encouraging efforts to converge the American and international rules. Both sides are expected to spend the next two years working to align GAAP and the international standards.
"I do not expect the two sets of standards will necessarily produce totally identical financial statements," he wrote. "But I do consider it necessary that convergence result in close alignment of the accounting for the same or essentially the same transactions, generally comparable results in trends and a continued cooperative will to reduce differences over time, as well as the transparent understanding of any significant differences."