SEC May Let Companies Abandon U.S. Accounting Rules
August 28th, 2008Via: Bloomberg:
The Securities and Exchange Commission may let large U.S. companies switch to international accounting rules in six years, a step it says will lower compliance costs and make American firms more competitive.
SEC commissioners today approved a “road map” that might allow corporations with market values exceeding $700 million to abandon U.S. accounting standards by 2014. Under the plan, about 110 U.S. companies that are global leaders in their industries may move to international rules as soon as 2010.
“A global set of high-quality accounting standards would be an international language of disclosure, transparency and comparability,” SEC Chairman Christopher Cox said at an open meeting in Washington. “It’s a goal worth pursuing.”
Meshing U.S. regulations with rules adopted by other countries is a priority for the agency, which has said companies will be able to reduce expenses by eliminating duplicate accounting. Investors will benefit because they ultimately bear the burden of higher compliance costs, SEC officials argue.
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At least one study has found companies show higher profits when they follow international standards.
Jack Ciesielski, publisher of The Analyst’s Accounting Observer, a Baltimore-based research service, studied 137 companies that reconciled results in 2006 under International Financial Reporting Standards, or IFRS, with U.S. generally accepted accounting principles. Ciesielski found 86 firms recorded higher earnings using IFRS, 47 had greater earnings with GAAP and four companies reported earnings were unchanged.
