Speech by SEC Commissioner:
Open Meeting Statement on Acceptance from Foreign Private Issuers of Financial Statements Prepared in Accordance with IFRS
Commissioner Paul S. Atkins
U.S. Securities and Exchange Commission
November 15, 2007
Thank you, Mr. Chairman. I am pleased to be part of a very important decision by the Commission and fittingly from abroad. If someone had told me five years ago that we would be convened today to consider eliminating the reconciliation requirement, I would never have believed it. I am very happy, of course, that my expectations were exceeded thanks to your efforts, Mr. Chairman, and the hard work of Con Hewitt, John White, and their excellent staffs.
Even though we are removing the reconciliation requirement sooner than I would have thought possible, I believe that we have arrived at a justifiable moment to do it. An ever-growing number of issuers is using IFRS. Users are becoming more comfortable with IFRS and relying less on reconciliations. Given that reconciliation is very costly for the shareholders who bear the expense and that reconciliation generally offers little new information, there is no point in waiting to drop the reconciliation requirement.
There is, however, still much work to be done. Like U.S. GAAP, IFRS are still a work in progress. There are areas in which standards are needed. FASB and the IASB have much still to do in converging US GAAP and IFRS, but both are committed to this work. The IASC Foundation, which oversees the IASB, is working to resolve the funding and governance issues that many commenters discussed in their letters. The SEC needs to be involved in resolving the issues related to the funding and governance of the IASB, supporting the further development and consistent implementation of IFRS, encouraging education in IFRS, and working towards continued convergence. I would note, however, that complete convergence is probably not a realistic goal. As a number of commenters observed, convergence for the sake of convergence without regard for quality is not a good approach.
Eliminating the reconciliation requirement, particularly in combination with the deregistration rule and the changes to Sarbanes-Oxley Section 404 implementation that we adopted earlier this year, make our capital markets more attractive to foreign private issuers. Foreign companies will factor the lower costs of being in our capital markets and the easier means for leaving our markets into their decisions about whether to come to the U.S. public capital markets in the first place. American investors are well-served by a system that affords them protections without imposing unnecessarily high costs on the companies in which they invest.
My fundamental hope is that what we do today will push us a little bit closer to a seamless global capital market in which investors have access to the information that they need to make investment decisions and companies have access to the capital that enables them to innovate, produce, and serve their customers.