In an effort to provide some relief to non-U.S. companies that sell shares in the U.S., the Securities and Exchange Commission has proposed allowing firms to provide two years’ worth of audited financial statements rather than three years’ worth in the first year they adopt new international accounting standards.
The SEC voted unanimously Thursday to approve the changes to help companies in Europe, Australia and Japan, to name a few, as they begin to implement the new standards.
"Easing the burdens clearly makes sense here," SEC commissioner Harvey Goldschmid told the Wall Street Journal. SEC commissioner Paul Atkins agreed, calling the plan a reasonable accommodation to companies outside the U.S. as they make the transition to new accounting rules.
SEC Chairman William Donaldson told the Journal that companies will encounter many challenges in implementing the new standards and the SEC’s action is intended to aid in the change without compromising financial reporting.
The SEC's proposal would pertain to companies implementing the new standards for any financial year beginning before Jan. 1, 2007, the Journal reported, adding that companies would have to provide some disclosures as well as information about who they reconciled their accounting to the new international standard, the Journal reported.
More than 90 countries have decided to adopt International Financial Reporting Standards (IFRSs) over the next five years, paving the way to move from individual jurisdictional standards to one set of international accounting standards. To help ease the transition, last June the International Accounting Standards Board issued IFRS 1: First-time Adoption of International Financial Reporting Standards , which explains how an entity should make the transition to IFRSs from another basis of accounting.