EU Squares Up To SEC Over Reporting Standards

by Jason Gorringe, Tax-News.com, London

05 October 2007

IFRS - GAAP - SEC - IASB - EU - EALC. Sounds dull? Yup, it's all about the globalization of accounting standards. But behind the alphabet soup there is a fierce battle going on between EU and US regulators.

A group of EU organizations has just asked the US Securities and Exchange Commission to accept the EU's version of IFRS, and not the 'pure' version as published by the IASB (the International Accounting Standards Board), a London-based independent organization which has been the long-term proponent of global accounting standards.

In July the SEC published for public comment a proposal to eliminate the current requirement that foreign private issuers with US activities have to file both IFRS and US (GAAP) financial statements. The EU submission was made last week just as the SEC's comment period came to a close.

The proposed amendments would apply to foreign private issuers that file financial statements that comply with the English language version of IFRS as published by the IASB, and allow those issuers to file those financial statements in their annual filings and registration statements without reconciliation to US GAAP.

"The Commission has taken a significant step on this important policy matter that was outlined in the 'Roadmap' announced in 2005," announced Conrad Hewitt, SEC Chief Accountant. "The staff continues to evaluate the considerations supporting the acceptance of IFRS financial statements and looks forward to receiving public input during the comment period."

The EU group of 17 European business organizations which has now told the SEC that it needs to correct a technical problem in its IFRS proposal includes the Union of Issuers Quoted in Europe and the European Association for Listed Companies. "Regulatory review of IFRS is the rule not only in Europe, but also in other countries where IFRS is used or under consideration, such as Australia, New Zealand and Canada," said the group.

This argument sounds fairly specious, and seems to reflect a European turf battle, since in practice IFRS standards are adopted without alteration by user countries.

The SEC said in July that it hopes its proposal will promote the development of a single global accounting standard in the long-term, which is exactly what the IFRS wants. But continental Europe always hates it when the UK takes pole position!

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