Speech by SEC Staff:
Opening Remarks at the SEC Open Meeting
John W. White
Director, Division of Corporation Finance
U.S. Securities and Exchange Commission
November 15, 2007
Thank you, Chairman Cox and members of the Commission.
I am very pleased that the Division of Corporation Finance and the Office of the Chief Accountant are here today to recommend that the Commission approve amendments to our rules and forms to accept from foreign private issuers their financial statements prepared in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board (without a reconciliation to U.S. GAAP). We also recommend that these amendments be applicable to financial statements for financial years ending after today, November 15, 2007.
In June of this year, the Commission solicited comment on proposed amendments relating to its acceptance of these IFRS financial statements without reconciliation to U.S. GAAP. After evaluating the comments received, we are pleased to recommend at this time that the Commission adopt those amendments, substantially as proposed.
In a moment, Michael Coco and Katrina Kimpel will describe the recommended rule amendments and the comment letters we received on this proposal.
Our recommended acceptance of these IFRS financial statements in U.S. filings is a significant step in the Commission's longstanding work toward reducing disparity in accounting standards. Reduced disparity, ultimately flowing from internationally accepted standards, is an objective the Commission has supported for nearly two decades - stretching from its 1988 Policy Statement to its 1997 report to Congress (in which we advocated the development of high-quality international standards as soon as possible) and extending to today's action.
But, while this is an important step, there remains work to be done before having high quality, globally accepted accounting standards in place becomes a reality. However, we believe that adoption of these amendments will support those ongoing efforts for the benefit of investors by encouraging the use of IFRS as issued by the IASB.
Thinking about investors, I would like to describe some of the expected benefits. The use of global accounting standards would protect investors by enhancing comparability between companies' reported results, and thus allow investors to understand investment opportunities more clearly than if they must compare divergent national accounting standards. A single set of global accounting standards would also facilitate issuers' access to global capital markets by reducing compliance and regulatory costs. Investors, in turn, would benefit from increased investment opportunities in their home markets.
Of course, for investors to realize these expected benefits, global accounting standards must be of high quality, and must be consistently and faithfully applied. Over the past several years, the staff's efforts regarding internationally accepted accounting standards have included a particular focus on the quality of the application of IFRS in practice.
The staff, in performing its ordinary disclosure review function, has reviewed the filings of foreign private issuers for the 2005 and 2006 financial years containing IFRS financial statements, including their U.S. GAAP reconciliation. Observations from the 2005 reviews were published in a staff report this past July, while items noted in the 2006 reviews will be covered in the comment letters which will be posted to our website as they become available. In our most recent reviews we are finding that companies are generally following our "futures" comments from the prior year, and that the items that are identified for comment do not appear to be more pervasive or significant than those we see in regular U.S. GAAP reviews.
Preparation of these rules has been possible due to the extraordinary hard work of many people in a short period of time - with the comment period ending less than two months ago. This has allowed us to make today's recommendations to you in time for these amendments to be applicable for financial years ending after today - and thus for years ending at the end of 2007.
You have already listed the names of key participants of the drafting team in Corporation Finance and OCA, many of whom are seated with me at the table. But, I have to do it again. In particular, I'd like to thank Paul Dudek, Craig Olinger, Michael Coco and Sondra Stokes in Corporation Finance, and Julie Erhardt, Katrina Kimpel and Jeff Minton in OCA for their extraordinary efforts.
I also would like to thank Ethiopis Tafara and the Office of International Affairs for their invaluable contributions, as well as of course the Office of General Counsel and Office of Economic Analysis.
With that, I now turn it over to Katrina for a review of the comments.