On November 15, 2007, the Securities and Exchange Commission ("Commission") announced that it had voted to approve rule amendments under which foreign private issuers that file reports under the Securities Exchange Act of 1934 may include in those reports financial statements prepared using International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB). Issuers that choose to prepare financial statements in compliance with IFRS will not be required to reconcile their financial statements to U.S. generally accepted accounting principles (U.S. GAAP), as current SEC rules require. However, issuers that use a basis of accounting other than the English language version of IFRS as published by IASB will continue to be required to reconcile those statements to U.S. GAAP.
In the announcement, the SEC stated that the rule changes, which were proposed last July, were effected to assist U.S. investors to "...better analyze and get more readily comparable financial information from the U.S.-registered foreign companies in which they invest." According to the SEC, two-thirds of American investors own securities of non-U.S. companies, up from approximately one-half five years ago. IFRS is mandatory in Europe and in several other countries, and is mandated or permitted in more than 100 countries, according to the SEC.
The SEC also announced the scheduling of two roundtable discussions in December regarding whether U.S. domestic issuers should be permitted to elect to use either IFRS or U.S. GAAP. The SEC had previously issued a concept release on this question.
The rule amendments will be effective 60 days after publication in the Federal Register and will apply to financial statements covering years ended on or after November 15, 2007.
For additional information, please contact Bonnie J. Roe, Gerald D. Shepherd, Scott M. Tayne, Jamshaid Khan or Darren W.T. Novak in our New York office at (212) 588-5500.
Davies Ward Phillips & Vineberg LLP, with over 235 lawyers, practises nationally and internationally from offices in Toronto, Montréal, New York and an affiliate in Paris and is consistently at the heart of the largest and most complex commercial and financial matters on behalf of its North American and overseas clients.
The information and comments contained herein are for the general information of the reader and are not intended as advice or opinions to be relied upon in relation to any particular circumstances. For particular applications of the law to specific situations, the reader should seek professional advice.
