The Convergence of Intl. and U.S. Financial Reporting Standards

Historically, United States public companies have been required to file and prepare financial statements according to U.S. Generally Accepted Accounting Principles, or GAAP. Until recently, companies that have operations in other countries that prepare financial statements in those countries based on the International Financial Reporting Standards, or IFRS, had to convert those statements to GAAP for reporting in the U.S. The SEC, in December of 2007, made the unprecedented move to allow select foreign filers to report in the U.S. without making such a conversion. Many believe that this is a precursor to adoption of IFRS for all U.S. reporting companies.

This has fueled the movement to replace GAAP with IFRS. The growing acceptance of IFRS as a basis for U.S. financial reporting represents both a fundamental change for the U.S. accounting profession and a change in financial reporting for U.S. based companies. Today nearly 100 countries require or allow the use of IFRS for the preparation of financial statements by publicly held companies. In the United States, the Securities and Exchange Commission is considering taking steps to set a date to allow U.S. public companies to use IFRS, and perhaps make its adoption mandatory. The SEC stated in a release dated Aug. 27 that it would release an implementation timetable by year’s end. Mandatory reporting under IFRS could start in 2014 for some U.S. companies.

What is IFRS?