Which companies are required to provide a U.S. GAAP reconciliation in their annu

Question

Which companies are required to provide a U.S. GAAP reconciliation in their annual report filed with the SEC?



Domestic U.S. companies listed on a U.S. securities exchange that use IFRS in preparing financial statements.


Foreign companies listed on a U.S. securities exchange that use something other than U.S. GAAP or IFRS in preparing financial statements.


Foreign companies listed on a U.S. securities exchange that use IFRS in preparing financial statements.
All foreign companies listed on a U.S. securities exchange.

Explanation / Answer

Assuming the Commission finds that it is appropriate for U.S. companies to start using IFRS, a key question, which I previewed earlier, is how such a transformation should be implemented? We are wrestling with this as we work on the staff's recommendations to the Commission concerning a proposed roadmap and this will be a key consideration for the Commission. Should all U.S. companies simply be mandated to start using IFRS in their SEC filings as of a certain date? Should there first be a period in which U.S. companies have the option to use IFRS in their financial statements, and if so, how long should such a period be? If there were such a period of optional use, would U.S. companies feel inclined to change to IFRS unless it were clear that mandated use of IFRS was in the foreseeable future? These are important questions that should be part of the public debate about any U.S. transition to IFRS. One observation that I came away with from the roundtables we had in December was panelists' lack of enthusiasm for a period of optional use without a date certain as to mandatory use of IFRS. In the view of these panelists, if IFRS is to be adopted in the U.S., it should be done in a manner that provides certainty to issuers and other market participants as to the path to be followed. It is perhaps worth noting that, as one looks around the world, most major capital markets that have moved to IFRS have done so on an all-at-once, mandatory basis for almost all domestic public companies in that market. Would this course work for us? Perhaps it could. On the other hand, though I of course do not know what the ultimate outcome will be, I certainly can see the value of a transition, or voluntary, period in a change of this potential magnitude. Usually when you come to a program with someone from the SEC as a speaker, you expect to get a lot of answers, because we at the SEC are the market's regulator and we are often called upon to be the final authority on any number of often technical matters. But this has been a speech with many questions, because we are not talking about technical matters. We are talking about a matter of paramount importance to the U.S. markets: What will financial reporting look like in the U.S. for years to come? It is a matter that should be thoroughly discussed and debated and then policy makers should move ahead, fully informed on perhaps disparate opinions, but also fully committed to one path or another. I think our time is well-spent with various parts of the issuer, auditor, financial, and investor community discussing the movement to IFRS in the U.S. I look forward to participating in those discussions and being an engaged listener and questioner myself. So in closing, I'll just leave you with this — I truly believe that the endpoint will be U.S. issuers using IFRS and that it is time to move in this direction. The SEC can provide leadership by planning now for how that result might be brought about, which in turn could provide U.S. issuers with greater clarity in this area.

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