US moves step closer to global accounting principles

The transition to truly global accounting principles has inched forward after a top regulator suggested American companies could file financial statements under international reporting rules alongside their filings under US generally accepted accounting principles (GAAP).

James Schnurr, chief accountant at the Securities and Exchange Commission (SEC), said that while full-scale adoption of International Financial Reporting Standards (IFRS) is unlikely at present, an alternative solution could be achieved.

He explained that some domestic issuers could prepare IFRS-based financial information in addition to the US GAAP based information that they use for purposes of SEC filings.  

“However, regulatory constraints may dissuade some issuers from providing this information, as current SEC rules would consider IFRS-based information to be a ‘non-GAAP’ financial measure for a domestic issuer,” Mr Schnurr added.  

IFRS reporting alongside US GAAP would simply be one alternative to full adoption of the standards issued by the International Accounting Standards Board, and the SEC chief accountant did not rule out full adoption of IFRS.

There seems to be little appetite at present for rushing headlong into IFRS. US companies are “generally are not supportive of full adoption for a variety of reasons, including legal issues and general cost-benefit concerns, among others”, said Mr Schnurr.

He added: “US constituents have also raised similar issues with a broad-based option. These issues include legal impediments, practical challenges, and an impact on comparability that does not currently exist in the domestic reporting environment.”

But there is cause for cautious optimism for those who would like to see a truly global set of accounting standards.

Mr Schnurr said he hopes to be in a position “in the coming months” to commence discussions about the different alternatives for “potential further incorporation of IFRS and the related issues/concerns of each alternative with the objective of reaching a recommendation on what, if any, further incorporation or use of IFRS by US registrants would be permitted or required”. We are a little closer to achieving true global standards, but it's still a long way off.