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SEC to Mull Letting U.S. Companies Use International Accounting Rules
By David Reilly
The Wall Street Journal
Wednesday, April 25, 2007


The Securities and Exchange Commission said it will consider allowing U.S. public companies to choose which type of accounting standards they use to report financial results, a move some believe could one day spell the end of U.S. generally accepted accounting principles, or GAAP.

The commission said it will begin soliciting comments this summer on a possible change allowing foreign companies registered with it to file financial results using international financial reporting standards, or IFRS.  Currently, foreign companies that file with the SEC must reconcile their results to U.S. GAAP, a costly and time-consuming process that many companies, especially in Europe, want to do away with.

If the commission changed the rules to give foreign companies a choice, it would also have to consider whether U.S. companies shouldn't be able to choose between U.S. and international rules, according to the SEC.  The announcement marks a "critical step" toward allowing U.S. companies to use international rules, John White, head of the agency's divisions of corporate finance, said.

SEC Chairman Christopher Cox said the agency remains committed to removing the reconciliation requirement by 2009.  Such a move was the subject of an SEC roundtable and is being closely watched by European Union officials.

Currently, U.S. companies are required to report results following U.S. GAAP.  Giving companies a choice between accounting rules could spell the end of a U.S.-based accounting system, some accounting experts believe.  The reasons:  International standards, which emphasize broad-based principles over detailed rules, are seen as giving companies greater flexibility;  also, many multinational companies will be using international standards for subsidiaries in foreign companies and would rather have one accounting system globally.

Some experts don't think a move away from U.S. GAAP would necessarily be bad.  "We should get seriously behind international accounting standards because we have something to offer their development and they're being used increasingly in every other part of the world," said Don Nicolaisen, a former SEC chief accountant who put together a road map for the agency to follow in looking to converge global accounting standards.  In fact, Mr. Nicolaisen believes the SEC should eventually dump U.S. GAAP altogether and require the use of international rules, as many countries already do.  "I think it would be a mistake for us to miss the boat by being the only nation with our own brand of accounting," he added.

Write to David Reilly at david.reilly@wsj.com

http://online.wsj.com/article/SB117746344482681373.html?mod=hps_us_at_glance_markets