The Securities and Exchange Commission has proposed amendments to encourage foreign companies that trade on U.S. exchanges to use International Financial Reporting Standards (IFRS).
The SEC stressed that the proposals are addressed particularly at foreign companies located in the European Union, which is requiring the adoption of IFRS beginning next year. The commission added that its proposals are also intended to encourage other foreign companies to switch their accounting to IFRS voluntarily.
The SEC noted that it currently requires a company filings to include three years of audited financial statements; under the proposed amendments, companies that adopt IFRS would be required to include only two years of audited statements.
The proposed amendments would apply to companies that publish IFRS financial statements for the first time for any financial year beginning no later than January 1, 2007. Any company that adopted IFRS would be required to show how previous disclosures differed from the international standard and how the company reconciled its previous system of accounting to IFRS.
“The proposals are intended to ease the burdens that foreign companies may face when they adopt IFRS for the first time, while improving the quality of financial disclosure that they provide to investors,” the SEC said in a statement.
The proposals will considered for adoption following a public-comment period.