SEC and CESR to develop a cross-Atlantic financial reporting plan

A plan to develop financial reporting standards and avoid regulatory conflicts will be implemented immediately by the Securities and Exchange Commission (SEC) and the Committee of European Securities Regulators (CESR), it was announced today.

The regulators expressed a desire for convergence between the US’s Generally Accepted Accounting Principles (GAAP) and the EU’s International Financial Reporting Standards (IFRS). To facilitate this, CESR is reviewing the implementation of GAAP by issuers in the EU, while the SEC will monitor implementation of IFRS by issuers in the US.

While anything that facilitates harmonisation will be welcomed by the industry, many believe the plan will not be sufficient, especially regarding outstanding interpretive issues in International Accounting Standards. IAS 39 in particular is the source of much controversy, with bankers arguing that it could both produce unwarranted volatility and incur high costs.

“Without a resolution of fundamental controversies surrounding IAS 39, the SEC and CESR are simply paying lip service. The regulators need to see that the rules are sound before they try to converge them,” says one industry insider.

The plan will also aim to modernise financial reporting and disclosure information technology and regulatory platforms for risk management. Trade associations are expected to comment on the plans later this week

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