By Christopher Twarowski
Washington Post Staff Writer
Thursday, August 28, 2008

The Securities and Exchange Commission voted unanimously yesterday to open public discussion on a proposal to mandate that all U.S. companies file financial disclosure statements using international accounting standards starting in 2014, instead of those traditionally used in the United States.

Under the proposal, a limited group of about 110 U.S. companies -- representing the 20 largest companies in their respective industries -- could adopt the International Financial Reporting Standards on an optional basis for filings in 2010. The SEC could rule in 2011 to open up early eligibility to additional companies.

The commission will decide in 2011 whether to implement the requirements.

"The world's capital markets have long searched for a single set of high-quality accounting standards that could be used anywhere on Earth," SEC Chairman Christopher Cox said. "An international language of disclosure and transparency would significantly improve investor confidence in global capital markets."

The SEC's change is contingent on several factors between now and 2011, including improvements in investors' ability to use interactive data reported according to IFRS and the ease with which the initial companies adopt the rules.

The proposal that companies be allowed to switch from U.S. accounting standards to international rules has been a hot-button issue for some time. Critics claim the shift may undermine protections for investors put in place in the wake of the Enron scandal in 2001.

Proponents say the change would lead to greater efficiency. Since more than 100 countries around the world, including all of Europe, currently require or permit IFRS reporting, according to the SEC, the move toward the international standard is logical, they say.