U.S., E.C. Eye ‘Roadmap’ to Convergence

Foreign public issuers that follow international financial reporting standards would not be required to reconcile to U.S. GAAP.
Stephen TaubApril 25, 2005

The United States and Europe are moving much closer toward recognizing each other’s accounting rules, which would remove heavy burdens on companies that want to list on exchanges outside their home continent.

William Donaldson, chairman of the Securities and Exchange Commission has discussed a “roadmap” with Charles McCreevy, the European Union Internal Market Commissioner that would eventually permit foreign public issuers not to reconcile to U.S. GAAP, provided that they follow international financial reporting standards, according to the SEC.

“The roadmap establishes a goal of eliminating the requirement as early as possible between now and 2009 at the latest,” the commission said in a statement. “Achieving that goal would, among other things, depend on a detailed analysis of the faithfulness and consistency of the application and interpretation of IFRS in financial statements across companies and jurisdictions, and continued progress on the IASB-FASB convergence project.”

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Given the reporting cycle for foreign companies, the first opportunity for the SEC staff to analyze their 2005 financial statements will be in the middle of 2006, added the commission.

Donaldson added that before the end of the year he expects the commission to consider a proposed rule that would make it easier for foreign companies to deregister.

Meanwhile, on Friday an official of the European Commission said that it is moving closer to recognizing U.S. accounting rules as equivalent to E.U. standards, according to Reuters. The wire service added that this week the Committee of European Securities Regulators is expected to publish a paper on equivalence before issuing its final advice in June.