SEC to lift GAAP requirement for non-U.S. companies | AccountingWEB

SEC to lift GAAP requirement for non-U.S. companies

Regulators at the Securities and Exchange Commission have tentatively agreed to relax accounting regulations for foreign companies that trade on U.S. exchanges. Approximately 1,200 non-US companies that list their stock on the New York Stock Exchange will be affected. Under the new rules, these companies will no longer have to reconcile their financial statements to U.S. Generally Accepted Accounting Principles (GAAP).

On Tuesday, SEC commissioners voted 5-0 to tentatively allow foreign companies to file financial statements with the agency using International Financial Reporting Standards international standard (IFRS). Complying with GAAP can be difficult and costly for foreign corporations.

The change is contingent on a favorable public comment period, which will begin in July. If formally adopted, the new regulations would apply to 2008 annual reports, which are filed in early 2009.

It has been suggested that the SEC is considering allowing U.S. companies to file their financial reports using the international standards as well.

The IFRS is generally considered more flexible, especially for large U.S. companies with foreign subsidiaries, which under the GAAP, must maintain two different sets of books.

"For those who aren't yet listed in the U.S. and have been concerned about the costs of obtaining a listing, while GAAP is not the only element, no doubt this removes one of the obstacles," said Ian Dilks, a partner at PricewaterhouseCoopers.

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