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The European Union and the US are expected to sign an agreement on the required reporting standards later this week during a meeting of the Transatlantic Economic Council, the US ambassador to the EU said yesterday.

At the end of April, the EU and US decided to introduce a joint set of accounting standards in order to end the costly requirement forcing European firms with a US listing to reconcile their results to American standards for publication in the US.

It appears that the US financial market regulator has yielded to EU pressure to bring forward the date on which the obligation to use GAAP is abolished. The US expects the EU on its part to introduce similar changes for US companies with a European listing. 

In February 2006, EU Internal Market Commissioner Charlie McCreevy and US Securities and Exchange Commission (SEC) Chairman Christopher Cox affirmed their commitment to eliminating the need for reconciliation between International Financial Reporting Standards (IFRS) and US Generally Accepted Accounting Principles (GAAP).  

Commissioner McCreevy, noting that he would expect that IFRS ultimately will be deemed acceptable in the US without the reconciliation, commented, "I very much welcome the fact that Chairman Cox has confirmed the SEC's commitment to work towards global accounting convergence.

"It is equally helpful that he clarified that a specific level of convergence is not a condition to be met before the SEC is willing to eliminate the reconciliation requirement into US GAAP. What is important is that IFRS are high quality standards and that investors in the United States can understand and use financial statements prepared under IFRS," he added.

McCreevy explained that achieving the goal of eliminating the reconciliation requirement will also require a new degree of exchange of information, and cooperation among regulators about the application of IFRS. He added that it will help regulators avoid conflicting conclusions in relation to European companies applying IFRS and filing in the US.

In particular, McCreevy noted that the approval of the financial statements by the regulatory authority in the home jurisdiction should be included in any decisions taken by the regulatory authorities in other markets.

Related articles

• SEC drops IFRS-GAAP reconciliation
• FASB and FAF call for delay to IFRS-GAAP deal
• Regulators call for stronger IASC

Related links

• Similarities and differences: A Comparison of IFRS and US GAAP (PricewaterhouseCoopers)
• International Accounting Standards Board
• GAAP Web