European Union Internal Market Commissioner Charlie McCreevy has announced that the EU will allow American companies based in Europe to continue using GAAP for financial reporting instead of requiring that they switch to international accounting standards.
The decision is in accord with a 2005 agreement between the EU and the U.S. to enable companies to list shares in both markets and to raise capital more easily. Earlier this month, the U.S. Securities and Exchange Commission declared it would accept International Financial Reporting Standards, or IFRS, and not require foreign companies to report using GAAP. That move is expected to save European companies as much as $3.7 billion, according to McCreevy.
"Now it will be Europe's turn" to accept accounts prepared under U.S. standards, McCreevy said at a European Federation of Accountants conference. "It is certainly my intention to propose that no reconciliation to IFRS will be needed," he said. "This is the only sensible way forward."
The formal regulatory decision will be made next year. "This decision will have to be taken next year. And it is certainly my intention to propose that no reconciliation to IFRS will be needed for companies filing their accounts under U.S. GAAP," said McCreevy.
Still on the table are plans between the EU and the U.S. to provide mutual recognition of the oversight of auditors by 2009, relieving international accounting firms of the prospect of answering to regulators on both sides of the Atlantic, according to a report in Bloomberg News.