Dems unhappy with "no reconciliation".

Despite opposition from the Democratic-controlled Congress, the Securities & Exchange Commission went ahead and decided to allow foreign companies with shares traded on a U.S. exchange to report their financials based on International Financial Reporting Standards (IFRS) without having to reconcile those reports with U.S. Generally Accepted Accounting Principles (GAAP), as is currently the case. The question is whether the SEC will now take a second, related step that it has been considering: allowing U.S. companies the option to use either GAAP or IFRS. The SEC explained the move as a way to encourage the development of IFRS as a uniform global standard rather than a divergent set of standards applied differently in every nation. Consistent application of IFRS will help U.S. investors who own foreign securities to have better comparability. Two-thirds of American investors own securities of foreign companies, which is a 30% increase in the past five years.

The SEC decision was applauded by U.S. stock exchanges. Bruce Aust, executive vice president of NASDAQ's Corporate Client Group, said, "It removes unnecessary costs and steps that create barriers to attracting international companies. The SEC's decision clearly communicates that the U.S. markets are dedicated to wringing the cost and inefficiency out of doing business in the U.S."

At the same time SEC Chairman Chris Cox announced the Commission's decision regarding foreign companies on November 15, he also announced that the SEC will convene two roundtables, on December 13 and December 17, to collect more feedback from the public on the issue of giving U.S. domestic issuers the same option to use either IFRS or U.S. GAAP. The AICPA supports such a move. In a comment letter to the SEC, AICPA Chairman Randy G. Fletchall and President and CEO Barry C. Melancon wrote, "The AICPA supports the goal of a single set of high-quality, comprehensive accounting standards to be used by public companies in the preparation of transparent and comparable financial reports throughout the world."

Congressional Democrats are unhappy with the SEC's November 15 announcement, however, and would be doubly angry if the Commission goes ahead and gives U.S. companies the option of using GAAP or IFRS. Senators Chris Dodd (D.-Conn.) and Jack Reed (D.-R.I.), chairman of the banking committee and its securities subcommittee, respectively, had written to Cox on November 14 opposing the next day's action on the basis that "the elimination of the reconcilement requirement is premature and being unduly rushed." It isn't clear yet whether Democrats will try to roll back the SEC decision via legislation.

STEPHEN BARLAS, EDITOR