US chamber endorsement of IFRS
shows convergence tide is turning

The US Chamber of Commerce has come out as a major
proponent of international accounting standards convergence.

Michael Ryan, senior vice-president and executive
director of the chamber’s centre for capital markets
competitiveness, said one of the reasons for supporting convergence
was the clear sense that IFRS is becoming the global accounting
standard. “Our view is that we should try to recognise in the US as
quickly as possible that [IFRS is becoming the global standard] and
there are a lot of steps that need to be done to achieve that. The
first obvious one is to allow companies that are using IFRS outside
the US to use it inside the US,” he said.

Ryan’s comments followed a letter from the chamber supporting a
recent US Securities and Exchange Commission (SEC) proposal to
accept financial statements from foreign companies using IFRS
without those companies having to reconcile the statements with US
GAAP. The comment period on the SEC proposal ended on 24


The SEC should also be more flexible in accepting reasonable
variations of IFRS from foreign companies, Ryan said. He noted that
“requiring rigid adherence to the International Accounting
Standards Board (IASB) version of IFRS would in effect be forcing
foreign private issuers to transition from one reconciliation
process to another”.

Ryan said another reason for supporting a move toward accepting
IFRS is that US market participants are already relying on IFRS
because they are already investing in and engaged in capital market
activity outside the US, where IFRS is the standard. In the
chamber’s letter of support, Ryan noted that nearly 75 percent of
the global market capitalisation outside the US is currently
subject to IFRS reporting to some degree. “We think that our
capital markets are best served when we are able to attract
customers from around the world, not just US issuers but also
foreign issuers, to access our capital markets, and that’s in our
interests. This reconciliation requirement is a hurdle to that so
we want to remove that hurdle,” Ryan added.

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Ryan said the chamber, which represents more than 3 million
businesses and organisations, also supports the SEC proposal
because if IFRS is to become the global accounting standard the US
wants a hand in its development. “We are only going to be invited
to do that if it matters to us, so we have to become engaged in a
substantive way in the IFRS debate,” he noted.

High compliance costs

Ryan said it is too difficult to estimate how much money the
proposal could save US and foreign companies. However, he points to
the dramatic increase in the number of overseas companies delisting
from the New York Stock Exchange (NYSE) since a new SEC rule made
it easier for foreign issuers to delist, and suggests this is one
result of high compliance costs. “I’m sure there are a variety of
reasons for those delistings, but when you start to see the tide
change in this direction there’s a lot of things that need to be
addressed. Certainly the GAAP reconciliation requirement has to be
one, that’s got to be very costly, not just in direct dollars but
in management time,” he said. Fourteen major companies, including
British Airways and Bayer, voluntarily delisted from the NYSE
between 25 April and 4 September this year.

The business association urged the SEC to make the rule, allowing
foreign companies to use IFRS, effective no later than 15 December
2007 so that foreign issuers may realise its cost reduction
benefits with their filings due in 2008. “Our point is ‘let’s get
going here’ – our capital markets are losing ground to foreign
capital markets for a variety of reasons,” Ryan said. The chamber
wants to identify the regulations that are easiest to change first
and those that need to be changed because more costs are associated
with them than benefits, he said.

The chamber also commended the SEC on its concept release to
consider whether to afford the same IFRS reporting option to US
registrants. However, Ryan stated: “The SEC must maintain a
vigorous approach in dealing with the issues of auditing
convergence and enforcement of global standards.”