The Financial Accounting Standards Board and its oversight foundation, the Financial Accounting Foundation, have sent a letter to the Securities and Exchange Commission asking for a delay in the agreement to allow foreign firms using International Financial Reporting Standards to no longer reconcile their accounts to U.S. GAAP rules.
In the letter, Robert Denham, chairman of the FAF, and Robert Herz, chairman of the FASB, said that investors would be better served if all U.S. public companies used accounting standards promulgated by a single global standard setter as the basis for preparing their financial reports. They believe this would be best accomplished by moving U.S. public companies to "an improved version" of International Financial Reporting Standards (IFRS), according to a report on the UK's Director of Finance Online.
"We believe permitting extended periods of choice between U.S. Generally Accepted Accounting Principles (GAAP) and IFRS results in a two-GAAP system that creates unnecessary complexity for investors and other users of financial information. Permitting choice would add to the overall complexity of our reporting system," the chairmen said in their letter.
The FASB and its Foundation suggested that the FASB, the FAF, the SEC, and other affected parties should work together to develop a transition plan for moving U.S. public companies to IFRS, identifying a target date for the transition that will provide time for making changes to elements of the U.S. financial reporting infrastructure, including auditing standards, GAAP-based regulations, education systems and licensing requirements.
"The removal of the requirement that foreign private issuers reconcile their reported results to US GAAP is a difficult and sensitive issue that could have important implications for the continued development of a truly international financial reporting system," the FASB and its Foundation said in their letter to the SEC.
Herz has been pushing U.S. regulators to create a national plan for U.S. companies to report results under the International Financial Reporting Standards (IFRS) rather than the U.S. Generally Accepted Accounting Principles (GAAP).
"Our belief is that this country should be moving toward IFRS," Herz said at a recent Financial Executives International conference in New York, according to a Reuters report. "But if we're going to go ride the IFRS horse, we want to make sure that it is secure, sustainable and there for the long run."
About 100 countries have adopted or announced intention to adopt IFRS, however most individual country regulators have adopted their own versions of the rules, with unique exemptions or amendments.
You can read the complete text of their letter to the SEC.