AN ANALYSIS OF THE CONTENT OF FORM 20-F U.S. GAAP RECONCILIATION BY FOREIGN ENTITIES EMPLOYING IFRS: IS THE SEC IFRS ROADMAP PREMATURE?

Although substantial progress has been made in the convergence of U. S. GAAP with IFRS, some major differences existed in 2006 and appear to remain extant today, a situation which can have a very substantial impact on reporting income statement items. These differences will make comparing financial results for companies reporting under the two different accounting models quite difficult and could encourage some U. S. companies to adopt international standards solely for the different financial accounting alternatives that may be available. Based on our review, it seems that, at a minimum, there should be more conformity in the areas of pensions and other post retirement benefits; financial instruments; and impairment, goodwill, and intangibles before the U. S. companies are allowed to choose between U. S. GAAP and IFRS, as proposed by the SEC beginning in the year 2010. Furthermore, our findings lead us to agree with the Financial Reporting Committee of the American Accounting Association (AAA 2008a) that we do not support the SECs ruling that eliminates the U.S. GAAP-IFRS reconciliation requirement at this time. In addition, our results induce us to disagree with Financial Accounting Standards Committee of the AAA (AAA 2008b) which endorses the SEC proposal that supports the ruling and also recommends that U. S. firms also be allowed to choose between IFRS and U.S. GAAP. Finally, given that substantial differences between IFRS and GAAP remain, we feel that the SEC roadmap to require all U. S. firms to adopt IFRS by 2014 is unwarranted without substantial progress on convergence in the areas we have noted.