Deborah Corbin Ballard, Richard Stockton College, USA
Abstract: The rapid expansion of global business has highlighted the need for high quality accounting standards that are utilized and accepted on a worldwide basis. The global harmonization of financial reporting should result in lower capital costs for companies through increased investor confidence. On March 4, 2008 the United States Securities and Exchange Commission (SEC) adopted rules to accept filings from foreign private issuers prepared in accordance with International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board (IASB) without reconciliation to United States Generally Accepted Accounting Principles (US GAAP). While over 120 countries require or permit the use of IFRS, this is the first ruling to accept IFRS for filings in the United States (US). Some of the reasons companies list on foreign securities exchanges are to raise additional capital and/or reduce the cost of capital, however investors have a tendency to favor national companies over international companies. To compensate for this bias, international companies will provide comparable information to the national companies. Preparing financial statements utilizing two separate forms of generally accepted accounting principles (GAAP) or providing a reconciliation from one GAAP to another GAAP is costly; however, the ability to raise additional capital and/or reduce the cost of capital is expected to more than compensate for the additional cost. This study will identify and analyze the GAAP utilized by foreign private issuers in their filings with the SEC for the period 2007 through 2010 to determine if foreign private issuers have adopted and utilize IFRS issued by the IASB without reconciliation to US GAAP for their filings with the SEC. The results of the study will provide an indication of the perception by foreign private issuers of the acceptance of IFRS by the US capital markets.
Keywords: IFRS, US GAAP reconciliation, Foreign private issuers, SEC Rule, US acceptance of IFRS
