On August 27, 2008, SEC proposed the potential mandatory adoption of IFRS in the U.S. beginning in 2014. The proposed rule would also allow certain qualifying domestic issuers to use IFRS as early as fiscal years ending on or after December 15, 2009.
The SEC proposal would permit early adoption of IFRS by a limited number of eligible U.S. issuers. The key to eligibility will be the size and industry of issuer. The issuer would need to meet the following two criteria in order to qualify for early adoption of IFRS:
- The issuer would need to be among the 20 largest companies, measured by market capitalization, in their industry group; and
- IFRS must be used by the majority of the 20 largest companies, measured by market capitalization, in that industry group.
SEC officials estimate that, under the proposal, at least 110 U.S. multinational companies in 34 different industries would be eligible for early adoption of IFRS.
The SEC plans to select one of the following options for two potential disclosure alternatives for companies electing to early adopt IFRS:
- Option A: Companies must comply with IFRS 1, First-time Adoption of International Financial Reporting Standards, and include a one-time reconciliation from IFRS to U.S. GAAP in their first set of IFRS financial statements.
- Option B: Companies must include ongoing un-audited reconciliations from IFRS to U.S. GAAP for the three years of financial information included in their Form 10-K.