Financial and Accounting Regulatory

Landscape
United States European Union Equivalent
• Securities and Exchange • The Committee of European
Commission (SEC) Securities Regulators (CESR)
• Financial Accounting • International Accounting
Standards Board (FASB) Standards Board (IASB)
• General Accepted • International Financial
Accounting Principles Reporting Standards (IFRS)
(GAAP)
Role of US Securities and Exchange Commission
and the Committee of European Securities
Regulators
United States European Union Equivalent
• SEC • CESR
- Responsible for enforcing - Responsible for improving
federal securities laws and the coordination among
regulating the securities securities regulators, assist
industry, stock and options European Commission as an
exchanges, and other advisory group and work on
electronic securities implementation of
markets in the United States community legislation in EU
 Role of Financial Accounting Standards
Board and International Accounting
Standards Board
United States European Union Equivalent
• FASB • IASB
-Designated by the SEC and -Responsible for promoting
is responsible for setting the use and application of
accounting standards for International Financial
public companies in the Reporting Standards (IFRS)
United States - Developed IFRS
-Developed GAAP
 Role of General Accepted Accounting
Principles and International Financial
Reporting Standards
United States European Union Equivalent
• GAAP • IFRS
- Provides a standard - Known as iGAAP. Provides
framework of accounting international accounting
guidelines standards similar to GAAP
- Common set of accounting - States how particular
principles, standards and types of transactions and
procedures that public other events should be
companies use to compile reported in financial
their financial statements statements
 Significant areas of US GAAP and IFRS
divergence
• IFRS does not permit Last In First Out (LIFO) as an inventory
costing method
• IFRS uses a single-step method for impairment write-downs
rather than the two-step method used in U.S. GAAP, making
write-downs more likely
• IFRS has a different probability threshold and measurement
objective for contingencies
• IFRS does not permit curing debt covenant violations after
year-end
• IFRS guidance regarding revenue recognition is less extensive
than GAAP and contains relatively little industry-specific
instruction
 Convergence
• IASB and FASB have started a convergence project to reduce
the numerous differences that exist between IFRS and US
GAAP. Convergence is designed to bring US GAAP and IFRS
closer together

• International companies will benefit from one set of

accounting standards, they will no longer have to maintain
accounting records in both GAAP and IFRS

• Investors will also benefit from this convergence as it will

simplify financial statement analysis
 Requirement of audited financial
statements
• A Form 10-K is an annual report required by the US SEC that
gives a comprehensive summary of a public company’s
performance. In additional to the annual10-K report, a 10-Q is
a similar report that is required on a quarterly basis

• Companies with more than $10 million in assets and a class of

equity securities that is held by more than 500 owners must
file annual and other periodic reports, regardless of whether
the securities are publicly or privately traded