For several years now, momentum has been building for a single set of high quality global accounting standards that could be consistently applied by issuers and auditors, and understood by investors throughout the world. Such standards are intended not only to lower costs for those issuers that currently maintain two or more sets of GAAP, but also to allow investors to draw better comparisons among global investment options. In 2002, the European Commission required most European Union listed companies to prepare their consolidated financial statements in accordance with IFRS starting on or after January 1, 2005. Concurrently, then SEC Chief Accountant Donald Nicolaisen published an article, or "roadmap," discussing the possible elimination of the U.S. GAAP reconciliation for foreign private issuers that use IFRS. The roadmap laid out a series of milestones that, if achieved, would result in the elimination of the U.S. GAAP reconciliation by 2009, if not sooner. In keeping with the roadmap, on July 2, 2007, the SEC published for public comment a proposal that would allow foreign private issuers to file IFRS financial statements without reconciliation to U.S. GAAP.
The possible elimination of the U.S. GAAP reconciliation arose out of feedback the SEC staff received at a public roundtable in March 2007. In addition to strongly supporting the elimination of the U.S. GAAP reconciliation, a number of panelists suggested that U.S. issuers be provided a similar choice. This led to the SEC's decision on July 25, 2007, to publish a Concept Release that would explore the possibility of allowing U.S. issuers the option of preparing their financial statements in accordance with IFRS. But is such an outcome likely for U.S. issuers and, if so, when? And if adoption of IFRS becomes optional for U.S. issuers, what factors should a company consider in making that election?
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