As a step along this Roadmap, this release then describes proposed amendments to permit a U.S. issuer that is among the largest companies worldwide within its industry, and whose industry uses IFRS as the basis of financial reporting more than any other set of standards, to elect to use IFRS beginning with filings for fiscal years ending on or after December 15, 2009. These amendments include a process by which U.S. issuers would seek confirmation from Commission staff that they are eligible to use IFRS in their Commission filings. This release also seeks comment on two alternative proposals under which U.S. issuers that
[[Page 70818]]
elect to use IFRS would disclose U.S. GAAP information.
II. The Role of IFRS in the U.S. Capital Markets
A. The Promise of Global Accounting Standards

1. The Global Nature of Today's Capital Markets

Today, investors, issuers and other capital markets participants are able to engage in financial transactions across national boundaries and to make investment, capital allocation and financing decisions on a global basis more readily than ever before. This is due in large measure to today's everfaster communications, and evermoreclosely linked markets. Advances in technology that facilitate securities transactions have reduced barriers that previously existed and that may have impeded crossborder investment for both retail and institutional investors. For instance, investors can more readily obtain information on a wide variety of international investment opportunities than in the past, largely due to the availability of information over the Internet. Further, it is now possible for U.S. investors to have access to real time securities transaction data from stock exchanges and other securities markets from around the world and to trade on global exchanges through accounts they manage over the Internet. As trading and investment become more global, investors face an increasing need for full, fair and reliable disclosure that enables comparison of financial information across investment alternatives that cross national boundaries.

A large and increasing number of U.S. investors hold securities of nonU.S. issuers. Further, U.S. investors have the ability to make crossborder investments readily.\32\ Thus, we believe it is important for U.S. investors to have access to the tools to compare effectively and efficiently their investment opportunities in a global capital market. The Commission has long considered a reduction in the disparity between the accounting and disclosure practices of the United States and those of other countries as an important objective for both the protection of investors and the efficiency of capital markets.\33\ Further, while our recent Advisory Committee on Improvements to Financial Reporting (``CIFiR'') purposefully limited its scope relating to international matters due to ongoing efforts by the Commission and the FASB, it did similarly note the following in its final report to the Commission.\34\
\32\ Over the period from 1990 to 2006, estimated investments in foreign equity securities held by U.S. residents has grown from approximately $200 billion to $4,300 billion, based on estimates published by the U.S. Bureau of Economic Analysis, U.S. Treasury statistics. See http://bea.gov/international/xls/intinv07_t2.xls. Included in this category are investments in equities, whether listed or unlisted, where the holding by the U.S. resident is less than 10%.
\33\ See, for example, Release No. 336360 (November 20, 1981) [46 FR 58511 (December 2, 1981)]. For a further discussion of the Commission's previous actions promoting development of a single set of highquality globally accepted accounting standards, see Section III.C. of Release No. 338831 (August 7, 2007) [72 FR 45600 (August 14, 2007)] (``2007 Concept Release'').
\34\ See Final Report of the Advisory Committee on Improvements to Financial Reporting to the United States Securities and Exchange Commission (August 1, 2008) (``CIFiR Final Report'').

We broadly support the continued move to a single set of high quality global accounting standards, coupled with enhanced international coordination to foster their consistent interpretation and to avoid jurisdictional variants. Further, we encourage the development of a roadmap to identify issues and milestones to transition to this end state in the U.S., with sufficient time to minimize disruptions, resource constraints, and the complexity arising from such a significant change.\35\
\35\ CIFiR Final Report, at page 21 (footnotes references omitted).

The Commission recognizes that the use of a single, widely accepted set of highquality accounting standards would benefit both the global capital markets and U.S. investors by providing a common basis for investors, issuers and others to evaluate investment opportunities and prospects in different jurisdictions. U.S. investors would be able to make betterinformed investment decisions if they were to obtain high quality financial information from U.S. companies that is more comparable to the presently available information from nonU.S. companies operating in the same industry or line of business. Capital formation and investor understanding would be enhanced if the world's major capital markets all operated under a single set of highquality accounting standards that elicit comparable, highquality financial information from public companies.

2. Potential for IFRS as the Global Accounting Standard

The increasing acceptance and use of IFRS in major capital markets throughout the world over the past several years, and its anticipated use in other countries in the near future, indicate that IFRS has the potential to become the set of accounting standards that best provide a common platform on which companies can report and investors can compare financial information. Approximately 113 countries around the world currently require or permit IFRS reporting for domestic, listed companies.\36\
\36\ Some countries have enacted IFRS as national standards and require compliance to be stated with those national standards. In some cases, these national standards are identical to IFRS as issued by the IASB; in other cases, these national standards have been more narrow, yet consistent with IFRS as issued by the IASB; and, in yet other cases, these national standards may permit additional options that are inconsistent with IFRS as issued by the IASB, although companies may opt to apply standards so that they comply with IFRS as issued by the IASB. See http://www.iasplus.com/country/ useias.htm.

Foreign jurisdictions have chosen to require or allow IFRS for many different reasons. For example, in the European Union (the ``E.U.''), prior to its requirement relating to IFRS applicable to companies incorporated and publicly traded in its Member States,\37\ accounting standards in each of the E.U. Member States generally were established individually in each jurisdiction. Further, each Member State would typically permit the use in its capital markets of accounting standards set in other jurisdictions, in addition to its own domestic accounting standards.\38\ IFRS provided a common set of accounting principles under which all domestic listings in the E.U. could report. In Canada, accounting standard setters concluded that, given the increasing globalization of capital markets and other recent developments, that it was timely for public Canadian companies to adopt globally accepted, highquality accounting standards by converging Canadian GAAP with IFRS over a transitional period, after which a separate and distinct Canadian GAAP would cease to exist as a basis of financial reporting for public companies.\39\ In Australia, the decision to adopt IFRS was part of a strategy to ensure consistency and comparability of Australian financial reporting with financial reporting across global financial markets.\40\ More countries
[[Page 70819]]
have adopted IFRS, including Israel,\41\ and others have plans to allow it, including Brazil.\42\ The market capitalization of exchange listed companies in the E.U., Australia and Israel totals $11 trillion (or approximately 26% of global market capitalization), and the market capitalization from those countries plus Brazil and Canada totals $13.4 trillion (or approximately 31% of global market capitalization).\43\ \37\ See Regulation (EC) No. 1606/2002 of the European Parliament and of the Council of the European Union of 19 July 2002 on the application of international accounting standards, Official Journal L. 243, 11/09/2002 P. 00010004.
\38\ For example, U.S. GAAP was accepted by some E.U. Member States for domestic registrants and still is accepted for foreign registrants.
\39\ For additional information, see http://www.cica.ca/ index.cfm/ci_id/44036/la_id/1.htm. The staff of the Canadian Securitities Administrators (``CSA'') has proposed retaining the existing option for a domestic Canadian issuer that is also an SEC issuer to use U.S. GAAP. See http://www.cica.ca/3/9/1/6/6/ index1.shtml. for the link to ``CSA Announcement re: IFRS in Canada'' (CSA Staff Notice 52321).
\40\ See http://www.asic.gov.au/asic/asic.nsf/byheadline/ Your+questions+about+implementing+the+IFRS?openDocument#1. \41\ See Israel Accounting Standard No. 29 ``Adoption of International Financial Reporting Standards,'' which describes the adoption of IFRS in Israel for years starting on January 1, 2008. \42\ See http://www.cvm.gov.br/port/snc/inst457.pdf. \43\ All figures are from the World Federation of Stock Exchanges, Domestic Market Capitalization as of September 30, 2008, in U.S. dollars.

The Commission is aware of the transitions made by other countries to IFRS. For example, the vast majority of listed European companies, including banks and insurance companies, moved to comply with the E.U. IFRS requirement in 2005 with the remainder transitioning in 2007. Under these transition approaches, in essence all or almost all of the listed companies transitioned to IFRS at the same time. Some foreign regulators have published reports relating to the implementation of IFRS in their country. For example, the U.K. Financial Reporting Review Panel and the Autorit[eacute] des March[eacute]s Financiers of France (``AMF'') have both published reports making observations on IFRS as applied in their jurisdictions.\44\
\44\ For the report of the U.K. Financial Reporting Review Panel, see ``Preliminary Report: IFRS Implementation'' available at http://www.frc.org.uk/images/uploaded/documents/ IFRS%20Implementation%20%20preliminary.pdf. For the report of the AMF, see ``Recommendations on accounting information reported in financial statements for 2006,'' dated December 19, 2006, available at http://www.amffrance.org/documents/general/7565_1.pdf.

As with all countries that have evaluated the potential use of IFRS in their own markets, the policy considerations in the United States must factor in the individual circumstances of its investors and capital markets. The U.S. capital markets are among the largest and most liquid in the world. U.S. GAAP is a wellestablished basis of financial reporting and is applied by all U.S. public companies, many foreign companies, and many U.S. private companies, as well as their auditors. Today, U.S. GAAP is accepted in capital markets around the world, and the Commission requires its use by all domestic issuers.\45\ The accounting principles established by the FASB have been recognized by the Commission as ``generally accepted'' for purposes of the U.S. federal securities laws.\46\
\45\ See Rule 401(a)(1) of Regulation SX [17 CFR 210.4
01(a)(1)].
\46\ See Release No. 338221, Financial Reporting Release (``FR'') 70 (April 25, 2003) [68 FR 23333 (May 1, 2003)] (``FR 70'').

Regardless of whether the Commission decides to allow or require IFRS for U.S. issuers in the future, the past and anticipated move towards the use of IFRS in other jurisdictions may have begun to affect U.S. investors' ability to evaluate investment alternatives as their level of investment in nonU.S. companies has increased over time.\47\ The growing level of foreign investment by U.S. residents in international investment opportunities, including opportunities to invest in issuers that do not file reports with the Commission, makes it likely that U.S. investors will increasingly need to use IFRS financial statements.\48\ Also, it is likely that large U.S. issuers that compete for capital on a global basis will increasingly need to use and understand IFRS financial statements in order to remain competitive. For these reasons, the Commission finds it advisable to continue to pursue consideration of the use of IFRS in the U.S. markets in order to better equip U.S. investors to make comparisons of U.S. companies with certain nonU.S. companies, while balancing this with the fact that U.S. investors should be able to compare U.S. companies with other U.S. companies.
\47\ As more companies move towards IFRS reporting, current and potential investors in U.S. issuers may increasingly be comparing those U.S. issuers' financial information to IFRSbased financial information of competing investment opportunities. For example, approximately 120 foreign private issuers currently report to the Commission using IFRS financial statements.
\48\ For example, U.S. investors may purchase securities issued by a nonreporting foreign company directly on a foreign exchange, or they may invest in American Depositary Receipts representing the securities of a foreign private issuer that is exempt from Exchange Act reporting requirements pursuant to Rule 12g32(b) [17 CFR 240.12g32(b)].

Promoting a single set of globally accepted accounting standards will benefit investors as more and more companies prepare their financial statements applying a single set of highquality accounting standards. With a single set of accounting standards, investors can more easily compare information and will be in a better position to make informed investment decisions. This benefit is dependent upon use of a single set of highquality standards globally and financial reporting that is, in fact, consistently applied across companies, industries and countries. Any decision we may take to expand the use of IFRS to U.S. issuers would necessitate our evaluation of whether global developments support the assertion of IFRS as the single set of high quality globally accepted accounting standards that is applied consistently across companies, industries and countries.

The Commission has identified certain considerations which may influence the degree to which comparability may be achieved through widespread adoption of IFRS. These considerations include the extent to which IFRS is adopted and applied globally, and whether IFRS is adopted and applied in foreign jurisdictions as issued by the IASB or as jurisdictional variants of IFRS.\49\ We believe that the benefits of moving towards a single set of globally accepted standards as a long term objective for increased comparability of financial statements are attainable through the use of IFRS only if IFRS represents a single set of highquality accounting standards, which is best accomplished through the use of IFRS as issued by the IASB. As stated previously, each jurisdiction's considerations surrounding the use of IFRS in its markets are unique to the jurisdiction's circumstances. Therefore, the large number of countries allowing or requiring IFRS in their markets does not alone determine the Commission's decision. However, in determining whether to proceed with requiring the use of IFRS by U.S. issuers, the Commission will consider the extent to which IFRS as issued by the IASB is used globally, is applied consistently, and supports the assertion of IFRS as the single set of highquality global accounting standards.\50\
\49\ Different jurisdictions often have internal processes through which they adopt or incorporate IFRS into their national accounting standards. Decisions made during those processes may result in discrepancies from IFRS as issued by the IASB.
\50\ In 2007, as part of our efforts to foster a single set of globally accepted accounting standards, we adopted amendments to allow foreign private issuers to file IFRS financial statements without reconciliation to U.S. GAAP only if the financial statements were prepared in accordance with IFRS as issued by the IASB. See ``Acceptance from Foreign Private Issuers of Financial Statements Prepared in Accordance with International Financial Reporting Standards Without Reconciliation to U.S.,'' Release No. 338879 (December 21, 2007) [73 FR 986 (January 4, 2008)] (the ``2007 Adopting Release''). The Commission proposed these rules in June 2007 [Release No. 338818 (July 3, 2007)] [72 FR 37962 (July 11, 2007)] (the ``2007 Proposing Release'').

B. Past Policy Considerations Regarding IFRS

Over time, the Commission has undertaken a series of initiatives to promote a single set of highquality globally accepted accounting standards as a means of advancing the objective of reduced disparity in financial reporting
[[Page 70820]]
between U.S. issuers and foreign issuers. Convergence of U.S. GAAP and IFRS as issued by the IASB, which involves the best efforts of the IASB and the FASB (referred to jointly as ``the Boards'') to make their financial reporting standards fully compatible on a standardby standard basis, has been the predominant approach taken in the United States to achieve that objective over the past six years.\51\ As discussed further below, the Commission continues to support the joint efforts of the IASB and the FASB as an important means of increasing the quality of IFRS and U.S. GAAP and, at the same time, reducing disparity between the two.
\51\ The Norwalk Agreement, issued in 2002, and a Memorandum of Understanding entered into by the FASB and the IASB in 2006 express the Boards' intentions to, on a best efforts basis, converge U.S. GAAP and IFRS. See http://www.fasb.org/news/memorandum.pdf and http://www.fasb.org/intl/mou_022706.pdf for further details.

More recently, the Commission's consideration of the use of IFRS by U.S. issuers has included the issuance of a Concept Release addressing whether U.S. issuers should be permitted, but not required, to use IFRS in their filings with the Commission.\52\ Specifically, the Commission sought input on the nature and extent of the public's interest in giving U.S. issuers the option to file with the Commission financial statements prepared in accordance with IFRS as issued by the IASB. The Commission received over 80 comment letters from a wide range of issuers, investors, accounting firms and other market participants.\53\ \52\ See 2007 Concept Release.
\53\ These comments are available at http://www.sec.gov/ comments/s72007/s72007.shtml.

The Commission also has held three public roundtables consisting of investors, issuers, accounting firms, educators, standard setters and other capital market participants to receive further input about the use of IFRS.\54\ In December 2007, the Commission held one roundtable on IFRS in U.S. markets and a second on practical issues surrounding the use of IFRS in recent years and its potential expanded use in future years. The third roundtable, in August 2008, related to the performance of U.S. GAAP and IFRS during the subprime crisis. \54\ Information on these Roundtables, including transcripts, is available on the Commission's Web site at http://www.sec.gov/ spotlight/ifrsroadmap.htm.

While many commenters on the 2007 Concept Release and the participants at the roundtables supported allowing U.S. issuers to use IFRS, certain commenters expressed the belief that IFRS should be mandated for all U.S. issuers and not limited to a specific group of U.S. issuers. Other commenters believed that U.S. issuers should continue to use U.S. GAAP, while supporting ongoing convergence. III. A Proposed Roadmap to IFRS Reporting by U.S. Issuers
A. Milestones To Be Achieved Leading to the Use of IFRS by U.S. Issuers

The Commission is proposing this Roadmap to set forth milestones which, if achieved, could lead to the eventual use of IFRS by all U.S. issuers. Through this Roadmap, the Commission is seeking to realize the objective of providing investors with financial information from U.S. issuers under a set of highquality globally accepted accounting standards, which would enable U.S. investors to better compare financial information of U.S. issuers and competing international investment opportunities. This Roadmap is further intended to encourage market participants to consider the effect of IFRS in our capital markets and to prepare for the use of IFRS financial statements by U.S. issuers in their filings with the Commission.

In addition to the milestones, the Commission also expects to consider, among other things, whether IFRS as issued by the IASB is a globally accepted set of accounting standards and whether it is consistently applied. The advantages to U.S. investors of increased comparability across investment alternatives, as contemplated under this Roadmap, are dependent upon financial reporting under IFRS that is, in fact, consistent across companies, industries and countries.

The course of action described in this proposed Roadmap reflects the deliberations of the Commission in light of current circumstances. We intend to publish the final Roadmap, if adopted, in our Codification of Financial Reporting Policies.\55\ We recognize, however, that as events occur, new circumstances may require us to update or revise the Roadmap. With the knowledge of the anticipated timetable for Commission rulemaking initiatives on this policy matter, investors, issuers and other market participants may engage more concretely in discussions about IFRS for U.S. issuers, both through comments provided to the Commission as well as in further dialogue among parties potentially affected. The Commission believes that any future actions relating to the use of IFRS by U.S. issuers would benefit from the increased awareness by all affected parties of the related issues and preparedness that this Roadmap is intended to foster. As we progress along this initiative, we anticipate receiving extensive input from investors, issuers and other affected parties, which we will consider carefully.
\55\ See FR 1 (April 15, 1982), 7 Fed. Sec. L. Rep. (CCH) ] 72,401, at 62,021.

This proposed Roadmap relates solely to U.S. issuers with respect to their periodic reporting requirements under Sections 13 and 15(d) of the Exchange Act, proxy and information statements under Section 14 of the Exchange Act and registration statements under Section 12 of the Exchange Act and Section 7 of the Securities Act. Our considerations at this time with respect to the possible use of IFRS do not include issuers that are investment companies under the Investment Company Act of 1940. Likewise, at this time, the Roadmap does not extend to other types of financial reports that are filed or furnished to the Commission by regulated entities, such as registered brokerdealers. 1. Improvements in Accounting Standards

In October 2002, the FASB and the IASB announced the issuance of a memorandum of understanding, called the Norwalk Agreement. The two bodies acknowledged their joint commitment to the development, ``as soon as practicable,'' of highquality, compatible accounting standards that could be used for both domestic and crossborder financial reporting. At that time, the FASB and the IASB pledged to use their best efforts to make their existing financial reporting standards fully compatible as soon as is practicable and to coordinate their future work programs to ensure that once achieved, compatibility is maintained. In a 2006 Memorandum of Understanding, the FASB and the IASB indicated that a common set of highquality global standards remains the longterm strategic priority of both the FASB and the IASB. As part of this commitment, the IASB and the FASB set out a work plan covering several projects and coordinated agendas so that major projects that one board takes up may also be taken up by the other board. That plan covered specific long and shortterm projects for work into 2008. In November 2007, the Trustees of the IASC Foundation reiterated their support for continuing the work program described in these memoranda, noting that future work is largely focused on areas in which the objective is to develop new worldclass international standards. The FASB and the IASB have updated the timetable for their joint work under the 2006
[[Page 70821]]
Memorandum of Understanding.\56\ The next phase of the joint work plan goes through 2011.
\56\ See the update to the 2006 Memorandum of Understanding at http://www.fasb.org/intl/MOU_091108.pdf.

The current joint work plans of the two standard setters, as well as other work undertaken by them, furthers the goal of comprehensive, highquality standards. The Commission will continue to monitor the activities of both the FASB and the IASB and the progress of their efforts. In past Commission releases, we have noted areas where IFRS provides limited guidance on a particular topic, such as accounting for insurance contracts and for extractive activities.\57\ Further, the current work plan of the FASB and the IASB includes accounting standards, including (without emphasizing priority) revenue recognition and financial statement presentation, that when completed should improve financial reporting significantly. The Commission will consider the degree of progress made by the FASB and the IASB in any future evaluation of the potential expanded role of IFRS in the reporting by U.S. issuers. When the Commission considers mandating use of IFRS by U.S. issuers in 2011, it would consider whether those accounting standards are of high quality and sufficiently comprehensive.\58\ The Commission urges the two Boards to continue working towards the completion of their joint work plan estimated to be completed in 2011 and other projects that are expected to improve financial reporting. \57\ See the discussion in Section III.B.4, below.
\58\ High quality accounting standards consist of a set of neutral principles that require consistent, comparable, relevant and reliable information that is useful for investors. See ``SEC Concept Release: International Accounting Standards,'' Release No. 337801 (February 16, 2000) [65 FR 8896 (February 23, 2000)].

In addition, it is important that accounting standards be established under a robust, independent process that includes careful consideration of possible alternative approaches and due process, which allows for input from and consideration of views expressed by affected parties, including investors. It is also important that accounting standards are promptly considered to keep standards current and reflect emerging accounting issues and changing business practices. Further, it is important that the accounting standards produced are capable of improving the accuracy and effectiveness of financial reporting and the protection of investors, and of resulting in a high quality of financial reporting relative to the standards which may be replaced. Thus, in considering future action as set out in this Roadmap, the Commission would also assess whether it believes that the IASB continues to develop its standards, including converged standards, through a process that reflects these elements.

2. Accountability and Funding of the IASC Foundation

The IASB is based in London and is an accounting standard setting body established to develop global standards for financial reporting.\59\ It is overseen by the IASC Foundation. The IASC Foundation is based in London and is a standalone, notfor profit organization, incorporated in Delaware. It is responsible for the activities of the IASB and other work that centers on IFRS, such as initiatives related to translation of IFRS from the English language, education about IFRS and the development of interactive data taxonomies for IFRS. The IASC Foundation is governed by 22 trustees (``IASC Foundation Trustees'') whose backgrounds are geographically diverse. \59\ For more information on the structure and operation of the IASB,see http://www.iasb.org.

The IASC Foundation has financed IASB operations largely through voluntary contributions from a wide range of market participants from across the world's capital markets, including from a number of firms in the accounting profession, companies, international organizations, central banks and governments. Funding commitments were made for the period 20012005 and then were extended for an additional two years through 2007. In June 2006, the IASC Foundation Trustees agreed on four elements that should govern the establishment of a funding approach designed to enable the IASC Foundation to remain a privatesector organization with the necessary resources to conduct its work in a timely fashion. The IASC Foundation Trustees determined that characteristics of the new scheme for 2008 would be broadbased, compelling, openended and countryspecific.\60\ The IASC Foundation Trustees continue to make progress in obtaining funding that satisfies those elements.\61\
\60\ Further description of these elements can be found on the IASB's Web site at http://www.iasb.org/About+Us/ About+the+IASC+Foundation/Funding.htm. The IASC Foundation describes these principles as follows:

The Commission will carefully consider the degree to which the IASC Foundation has a secure, stable funding mechanism that permits it to function independently and that enhances the IASB's standard setting process. The IASC Foundation has developed targeted contribution levels from individual jurisdictions. Realizing the IASC Foundation's goal of receiving openended funding commitments from a broad base of constituents and that are compulsory would encourage the independent functioning of the IASB in its standard setting process. Otherwise, the IASB may be subject to a perceived or, potentially, an actual connection between the availability of funding and the outcome of its standard setting process. We believe that our future determination regarding the required use of IFRS for all U.S. issuers should only occur after the IASC Foundation reaches its goal of securing a stable funding mechanism that supports the independent functioning of the IASB.

National accounting standard setters traditionally have been accountable to a national securities regulator or other government authority. In the United States, the Financial Accounting Foundation (``FAF''), the parent of the FASB, is overseen by the Commission. The IASC Foundation has not historically had a similar link with any national securities regulators. Recognizing that such a relationship would enhance the public accountability of the IASC Foundation, its Trustees have proposed amendments to its Constitution to establish a connection between the IASC Foundation and a Monitoring Group composed of securities authorities charged with the adoption or recognition of accounting standards used in their respective jurisdictions.\62\ [[Page 70822]]
The Commission has been working with other national securities authorities and the International Organization of Securities Commissions to establish the Monitoring Group to enable it to begin its work once the IASC Foundation adopts the necessary changes to its Constitution.\63\ The securities authorities, including the Commission, envision that the Monitoring Group will participate in and approve nominations for IASC Foundation Trustees, review the funding arrangements of the IASC Foundation for adequacy and appropriateness, and address matters that the IASC Foundation Trustees are responsible for, such as oversight of the IASB and potential areas for consideration by the IASB in its ongoing work.\64\
\62\ See http://www.iasb.org/NR/rdonlyres/12CC476DB88F418A 826F71A7465FC2E0/0/Proposal_and_issues_for_the_
Constitution.pdf for a full description of the proposed amendments to the Constitution.
\63\ See the Commission's joint statement with other national securities regulators with respect to the establishment of a Monitoring Group at http://www.sec.gov/news/press/2007/2007226.htm. \64\ The proposed responsibilities of the Monitoring Group do not extend to the standard setting process.

The Commission believes that the accountability of the IASC Foundation will be enhanced once the Monitoring Group provides the forum for interaction between securities authorities and the IASC Foundation Trustees. The Commission believes that effective oversight is critical to mandating that U.S. issuers prepare financial statements in accordance with IFRS. Based on the progress of the discussions among securities regulators, as well as the IASC Foundation's timetable for adopting the relevant changes to its Constitution, the Commission assumes that the Monitoring Group will have been established and be functioning by the time the Commission considers mandating the use of IFRS for U.S. issuers. We will evaluate the effectiveness of the oversight mechanism (including the functioning of the multilateral nature of the Monitoring Group) in making the determination whether mandating IFRS is in the public interest for the protection of investors and our markets.
3. Improvement in the Ability To Use Interactive Data for IFRS Reporting

In May 2008, the Commission proposed rules to require companies to provide their financial statements to the Commission and on their corporate Web sites in interactive data format using the eXtensible Business Reporting Language (``XBRL'') in order to improve their usefulness to investors.\65\ Under those proposed rules, financial statement information could be submitted by public companies in interactive data format, and that financial information could then be downloaded directly into spreadsheets, analyzed in a variety of ways using offtheshelf commercial software, or used within investment models in any of a number of other software formats. The rules proposed in May, if adopted, would apply to domestic and foreign public companies that prepare their financial statements in accordance with U.S. GAAP, and foreign private issuers that prepare their financial statements using IFRS as issued by the IASB. Under the proposal, foreign private issuers that prepare their financial statements using IFRS as issued by the IASB would be required to provide financial statements in interactive data format starting with their fiscal periods ending on or after December 15, 2010. If the Commission adopts its proposed rules relating to interactive data, it is anticipated that they would apply to the limited number of U.S. issuers that could elect to file IFRS financial statements as proposed in this release. \65\ See ``Interactive Data to Improve Financial Reporting,'' Release No. 338924 (May 30, 2008) [73 FR 32794 (June 10, 2008)].

In order to realize the improvements in the usefulness and comparability of financial information anticipated upon the widespread use of interactive data, U.S. issuers would have to be capable of providing IFRS financial statements to the Commission in interactive data format at a greater level of detail than is currently available. Therefore, the state of development of an IFRS list of tags for interactive data reporting will be a consideration in the Commission's determination of whether to require the use of IFRS for all U.S. issuers. The IASC Foundation first published a complete list of tags for the IFRS ``Bound Volume'' in 2004, and has published annual updates since then to reflect new pronouncements, changes in XBRL technical standards, and other improvements; the most recent such update was published in July 2008. The Commission staff is actively involved in the improvement and monitoring of the IFRS list of tags via participation in the IASC Foundation's XBRL Advisory Council. The Commission believes it is appropriate to consider the IASC Foundation's progress in the development of IFRS taxonomies prior to proceeding with rulemaking on IFRS for all U.S. issuers.

4. Education and Training

Reporting in accordance with IFRS by U.S. issuers would increase the need for effective training and education about IFRS for investors, accountants, auditors and others involved in the preparation and use of financial statements, as there are differences between U.S. GAAP and IFRS.\66\ Investor education is particularly important, so that users of financial statements can work with the financial information issuers publish. The main benefits to investors of a single set of highquality globally accepted accounting standards would be realized only if investors more fully understood the basis for the reported results. In addition to investors, other financial statement users may include customers, vendors, rating agencies and analysts.
\66\ See, as just one example, http://www.kpmgifrsinstitute.com/ documents/IFRS/
721200810043IFRS%20compared%20to%20U.S.%20GAAP%20An%20Overview%20(200 8).pdf.

The education and ongoing training of most accountants in the United States is limited to or predominantly focused on the current provisions of U.S. GAAP. Consequently, many parties would likely need to undertake comprehensive education on IFRS. The need for IFRS training would involve personnel of issuers, their governing bodies, such as audit committees, and their auditors. Such requirements for training also extend to specialists, such as actuaries and valuation experts, since these professionals are engaged by management to assist in measuring certain assets and liabilities, and likely are not currently proficient in IFRS. Professional associations and industry groups would need to integrate IFRS into their training materials, publications, testing and certification programs. Colleges and universities would need to include IFRS in their curricula.\67\ Furthermore, it would be appropriate to include IFRS in the Uniform CPA Examination.\68\
\67\ IFRS supplements to and IFRS content in accounting textbooks used in U.S. universities have become increasingly available.
\68\ The Board of Examiners of the AICPA has issued an exposure draft, ``Proposed Content and Skill Specifications for the Uniform CPA Examination'' which proposed, among other things, inclusion of certain aspects of the IFRS conceptual framework and standard setting process in future Uniform CPA Examinations. Further, the proposal states that if IFRS becomes generally accepted in the United States, inclusion of those standards in the examination would expand. See http://www.cpaexam.org/cpa/exposure_draft.html for the full text of the exposure draft.

On the regulatory side, the Commission staff has continued to develop its familiarity with IFRS, and such efforts would need to continue and intensify if the Commission were to
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require U.S. issuers to file financial statements prepared in accordance with IFRS. The Public Company Accounting Oversight Board (``PCAOB''), as part of its inspection of registered public accounting firms, regularly reviews the audits of public companies. We understand the PCAOB has already begun to implement training courses in IFRS to assist its staff in carrying out inspections, but would need to expand these training programs.

The strategies taken by those participants in markets where issuers already report in accordance with IFRS may serve as examples of approaches to increasing education and awareness of IFRS. The private sector may also respond to any increase in demand for education about IFRS by making educational materials available. Since the Commission's issuance of the Concept Release in August 2007, several of the largest accounting firms in the United States have increased the material made available to the public about IFRS generally as well as about the application of specific IFRS standards. For example, several of the accounting firms have held web casts accessible free of charge to the general public discussing different aspects of IFRS. The Commission would take into account the then current status of the overall education, training and readiness of investors, preparers, auditors and other parties involved in the preparation of financial statements prior to proceeding with rulemaking on IFRS for all U.S. issuers. 5. Limited Early Use of IFRS Where This Would Enhance Comparability for U.S. Investors

This Roadmap contemplates that the Commission would make a decision in 2011 with regard to the mandated use of IFRS for U.S. issuers, as described below in Sections III.A.6. and 7. As part of this Roadmap, we also are proposing amendments to our rules, regulations and forms which, if adopted, would allow a limited number of U.S. issuers to file IFRS financial statements prior to any mandated use of IFRS in Commission filings. These proposed amendments are described later in this release.

These proposed amendments would allow the limited early use of IFRS by U.S. issuers where it would enhance the comparability of financial reporting to U.S. investors for purposes of comparing the largest U.S. issuers with the largest nonU.S. companies in the same industry. Further, the Commission anticipates that providing the alternative to U.S. issuers to file IFRS financial statements would broaden the awareness and attention given to IFRS as a single set of highquality globally accepted accounting standards.

The Commission acknowledges the wide variety of opinion that has been expressed on this subject, including through comment letters received on the 2007 Concept Release and feedback received in the Commission's roundtables. Many commenters expressed the view that the option to use IFRS should be extended to all U.S. issuers. Others stated that we should require IFRS for all U.S. issuers. Several of these commenters indicated that any option to use IFRS should only be part of a transition to the mandatory use of IFRS. Others opposed the optional or mandatory use of IFRS at this time, and instead called for a continuation of the ongoing work to improve and converge U.S. GAAP and IFRS. Still others cited concerns in such areas as tax regimes, the stage of development of IFRS in certain areas in comparison to U.S. GAAP, the U.S. legal environment, and the ability of auditors to issue opinions on IFRS financial statements, as bearing on the questions of whether and how the use of IFRS should be extended to any U.S. issuers. We believe allowing the limited use of IFRS by U.S. issuers, only in those cases where to do so would enhance the comparability of an industry's financial reporting for the benefit of investors in making comparisons to nonU.S. issuers, may help inform the decision whether to mandate the use of IFRS for U.S. public issuers. We also believe that the ability of capital market participants to evaluate and comment on these questions would be enhanced by allowing this limited use of IFRS. We believe this is a prudent approach that will support and inform our consideration of the milestones in the proposed Roadmap as well as any future Commission action.

We also are aware that the proposed amendments would permit some U.S. issuers to use IFRS financial statements while other U.S. issuers continue to use U.S. GAAP, thereby creating a dual system of financial reporting that has not existed previously for U.S. public companies. This would reduce the comparability among U.S. issuers and would require investor familiarity with both sets of accounting standards. If the Commission did not act on further milestones in this Roadmap, this dual system could continue and could increase if more issuers eligible to use IFRS elect to do so. To the extent a dual system of financial reporting develops in the United States for U.S. public companies, and this development affects the comparability of financial statements among U.S. public companies, this may create a need to reach a final resolution on the Roadmap. In order to increase the likelihood that the comparability between issuers would be enhanced, we therefore have limited the proposed option to use IFRS to a group of larger U.S. companies in industries in which IFRS is the mostused set of standards globally.\69\ We believe that U.S. investors would benefit from an enhanced ability to compare investment opportunities.
\69\ Mindful that all U.S. issuers currently use U.S. GAAP in their Commission filings, we are also making alternative proposals for U.S. issuers that elect to use IFRS with respect to the disclosure of U.S. GAAP information, which should promote the continued comparability among U.S. issuers whether they use IFRS or U.S. GAAP in their primary financial statements.
6. Anticipated Timing of Future Rulemaking by the Commission

After reviewing the status of the milestones and the study discussed below, the Commission would determine, in 2011, whether to proceed with rules requiring U.S. public companies to file financial statements prepared in accordance with IFRS by 2014 if it is in the public interest and promotes investor protection for us to do so. In order to assist the Commission in determining whether to proceed with such a rulemaking, the staff has already begun a comprehensive review of all Commission rules relating to financial reporting in order to recommend amendments that would fully implement IFRS reporting throughout the regulatory framework for registration and reporting under the Exchange Act and the Securities Act.\70\ We believe that a Commission decision and action in 2011 would provide issuers with sufficient early notice of the transition to IFRS to permit them to begin their internal accounting using IFRS in 2012, which would be the earliest fiscal year that would be covered under the earliest anticipated phasein for IFRS reporting in 2014, as described below in Section III.A.7.
\70\ The Commission also would evaluate the role of a private sector accounting standard setter, including the role of the FASB and how IFRS would be incorporated as mandatory accounting standards for U.S. issuers.

We are proposing this Roadmap towards the mandatory, rather than elective, use of IFRS for U.S. issuers in order to promote fully a single set of highquality globally accepted accounting standards to improve the comparability of financial information prepared by U.S. public companies and foreign companies. As described in Section I, IFRS is the basis of financial reporting used in a large and increasing [[Page 70824]]
number of countries worldwide. Because IFRS has the greatest potential to become the global standard of accounting, we believe it is in the interest of U.S. investors, U.S. issuers and U.S. markets to consider mandating reporting using IFRS in the United States as well. Additionally, we believe that over the long term the existence of dual accounting standards in the United States may create challenges in the U.S. capital markets, such as comparability for investors and other users of financial information and professional competence of auditors. We therefore are proposing this Roadmap towards the mandatory use of IFRS by U.S. issuers.

If we decide to move forward with rulemaking for the use of IFRS by U.S. issuers, we expect to continue to require that issuers provide three years of audited annual IFRS financial statements. Currently, U.S. issuers are required to provide in their filings with the Commission three years of audited U.S. GAAP financial statements.\71\ Because the initiative to require the use of IFRS by U.S. issuers relates to the set of accounting principles that is used for financial reporting and not to the periods for which financial reporting is required, the Commission expects that it would require three years of audited financial statements in the first year of IFRS reporting.\72\ \71\ See Rule 302(a) of Regulation SX [17 CFR 210.302(a)]. \72\ To illustrate, if we require IFRS for the years ending on or after December 15, 2014, a calendar year company would report for the year ending December 31, 2014 using IFRS for the years ending December 31, 2012, 2013 and 2014. Many such companies would want to start IFRS internal accounting on January 1, 2012. However, during 2012, 2013 and the first three quarters of 2014, they would continue to be publicly reporting under existing U.S. GAAP.

To assist the Commission in its decision to mandate the use of IFRS by U.S. issuers, the Commission directs the Office of the Chief Accountant with appropriate consultation with other Divisions and Offices to undertake a study and report to the Commission on the implications for investors and other market participants of the implementation of IFRS for U.S. issuers. We anticipate that the report would be made public by the Commission.

7. Implementation of the Mandatory Use of IFRS

One means of implementing IFRS reporting by U.S. issuers that we are considering is a staged transition, as opposed to all U.S. issuers transitioning at once. Provisionally, under the transition, IFRS filings would begin for large accelerated filers for fiscal years ending on or

FOR FURTHER INFORMATION CONTACT Craig Olinger, Deputy Chief Accountant, Division of Corporation Finance, at (202) 5513400 or Michael D. Coco, Special Counsel, Office of International Corporate Finance, Division of Corporation Finance, at (202) 5513450, or Liza McAndrew Moberg, Professional Accounting Fellow, Office of the Chief Accountant, at (202) 5515300, U.S. Securities and Exchange Commission, 100 F Street, NE., Washington, DC 205493628.