Updated: SEC chair threatens to abandon IFRS accounting rules over sustainability push

Paul Atkins raises prospect of cancelling a rule allowing non-US firms to use IASB because of focus on ISSB

America’s biggest financial regulator may ban foreign firms from using the IFRS Foundation’s accounting rules because of its recent sustainability push.  

Since 2007, the US Securities and Exchange Commission (SEC) has allowed overseas companies to disclose their financial reports in line with the International Accounting Standards Board (IASB), instead of the Generally Accepted Accounting Principles used by US issuers.   

IASB’s standards, which are commonplace in more than 140 jurisdictions, including the EU, Australia and Canada, are overseen by the IFRS Foundation.  

But in a speech on Wednesday, the SEC’s new chair, Paul Atkins, warned that the carve-out may be removed in response to the Foundation’s expansion into sustainability standards, via its International Sustainability Standards Board (ISSB) established in 2021. 

Atkins supported the move to permit IASB reporting during his previous term at the SEC, which ended in 2008. 

But speaking at an event hosted by the OECD, the Republican said the rule was predicated on IASB receiving “stable funding”, which he suggested was under threat because the IFRS Foundation was “now responsible for securing funding for both the IASB and the ISSB”. 

He warned that if the IFRS Foundation fails to fully fund the IASB, it could invalidate one of the “underlying premises for the SEC’s elimination of the reconciliation requirement for foreign companies” and could prompt “a retrospective review of that decision”. 

He encouraged the standard setter to “focus on standards for financial accounting, rather than specious and speculative issues”.

Update

Since publication, a spokesperson for the IFRS Foundation has provided the following statement:

‘The SEC is an important stakeholder and we continue to maintain close dialogue with its leadership and staff. The IFRS Foundation was created over two decades ago to enable the disclosure of financially material information for the capital markets and remains focused on this task. The IFRS Foundation was asked to establish the ISSB in response to investor and capital market demand globally for financially material sustainability-related financial disclosures. The IASB and the ISSB operate and are funded independently – a key consideration when the ISSB was established – whilst their respective standards do not impose requirements on each other. The IFRS Foundation is midway through a two-year transformation programme to ensure we are efficient and effective in delivering for capital markets, including the development of our long-term funding strategy.”