The chair of the US Securities & Exchange Commission (SEC), Paul Atkins, has warned that the agency may revisit its 2007 decision to exempt foreign registrant companies from reconciling their accounts from International Financial Reporting Standards (IFRS) to US Generally Accepted Accounting Principles (GAAP).
He said: “If the IASB does not receive full, stable funding, then one of the underlying premises for the SEC’s elimination of the reconciliation requirement for foreign companies in 2007 may no longer be valid, and we may need to engage in a retrospective review of that decision.”
The SEC chair’s remarks came in a speech delivered last week in Paris to the Inaugural OECD Roundtable on Global Financial Markets amid concerns stateside over the funding and expanding mandate of the IFRS Foundation.
Also in his speech, Atkins set out concerns about the EU’s new Corporate Sustainability Reporting Directive (CSRD) and Corporate Sustainability Due Diligence Directive (CSDDD).
Moreover, the IFRS Foundation’s recent move to establish the International Sustainability Standards Board (ISSB) has prompted questions about whether its focus and resources could be diverted from its core mission of developing robust financial accounting standards.
Concession with strings attached
Atkins emphasised that the 2007 exemption was predicated on the IASB’s ability to operate as a self-sustaining and independent standard-setter, with “stable funding” being a critical consideration.
The SEC’s warning that it might review the situation comes just days after the comment period closed on a concept release addressing the definition of a Foreign Private Issuer.
The agency is questioning whether regulatory accommodations for FPIs, such as more flexible reporting timelines, are still justified. Data compiled by the SEC staff show a significant change in the FPI population, with a growing number of these companies having minimal or no trading in non-US markets.
This shift has led the SEC to question whether this regulatory mismatch undermines investor protections.
IFRS, US GAAP convergence push
The original 2007 decision to scrap the reconciliation requirement for IFRS filers was a landmark step in a years-long effort to converge IFRS and US GAAP, a process that began with the Norwalk Agreement in 2002.
The goal was to create a single set of global accounting standards to simplify cross-border investment, and the no-reconciliation rule was a major accommodation for foreign companies.
Atkins’s latest remarks, however, align with a broader scrutiny of ESG-related rulemaking, both in the US and abroad.
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