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March 6, 2011

EC urges US to make “firm commitment” to IFRS

The European Commission has encouraged the US to make a positive decision towards adopting IFRS, blaming convergence between IFRS and US GAAP for higher costs to EU companies.

“Convergence between IFRS and US accounting standards imposes costs on EU companies that are increasingly difficult to justify without a firm commitment by the US to IFRS,” the EC said in its response to the strategy review of the IFRS Foundation.

The EC signaled to the US Securities and Exchange Commission (SEC) that the US adoption of IFRS is essential and that the US could lose its international influence if it is to prolong the adoption of IFRS.

The EC comment letter said the winding-down of the International Accounting Standards Board (IASB) – Financial Accounting Standards Board (FASB) convergence programme, combined with a more rigorous agenda-setting and due process, should in practice lead to a reduction in the peace of the IASB’s standard setting activity.

“This should enhance stability and comparability across time of financial information produced on the basis of IFRS, which should benefit all users of this information – investors, preparers, regulators, etc.” the EC said in its summation to the IFRS Foundation.

The SEC is expected to make a decision on IFRS adoption within the next 18 months.

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