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European Commission Senator, Charlie McCreevy, has praised the progress made by US regulators in helping foreign firms exist under two different accounting practices. Speaking to the European Federation of Accountants' Conference on Audit Regulation in Brussels on Tuesday, McCreevy felt that the US had made great steps and that Europe should now start to reciprocate.
The differences between accounting practices used by public firms has caused much aggravation and even more spending as firms attempt to satisfy the requirements of public accounts in many parts of the world. The major difficulty has been that European firms, and many other countries, have standardised on International Financial Reporting Standards (IFRS) whilst Generally Accepted Accounting Principles (GAAP) is the standard framework of financial accounting in the US.
Last week the US Securities and Exchange Commission decided to allow foreign issuers to file accounts under IFRS without reconciliation to US standards. McCreevy said “This decision was made little more than two years after Chairman Cox and I affirmed our commitment to a roadmap to do away with costly reconciliations between US and EU accounting standards. So the strategy we have been pursuing with our US counterparts is bearing fruit: we are making major strides towards one global accounting language.”
As well as the US accepting IFRS for European firms, they are considering allowing US firms to use IFRS as well. The financial benefits of this change for European firms raising capital in the US is considerable and McCreevy spoke of estimates of savings of 2.5 billion Euros. He concluded by saying “Now it will be Europe's turn to accept accounts in US GAAP. This decision will have to be taken next year. And it is certainly my intention to propose that no reconciliation to IFRS will be needed for companies filing their accounts under US GAAP. This is the only sensible way forward”.
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