International Financial Reporting Standards

IFRS For Hedge Funds

International Financial Reporting Standards (IFRS)

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The U.S. is almost the only major capital market that has not yet adopted or committed to adopting IFRS, but it seems that this may be changing soon. In August 2007, the SEC issued a "concept release" soliciting input on whether U.S. registrants should be permitted to have the option to prepare their financial statements using IFRS or GAAP for SEC reporting purposes. The majority of comments received on the concept release expressed support for permitting IFRS for U.S. registrants. In December 2007, the SEC held additional roundtables with similar results. On Aug. 27, 2008, the SEC staff recommended that they adopt a roadmap that could lead to mandatory use of IFRS by U.S. companies beginning in 2014.

But why should U.S.-based hedge fund or fund administrators start considering IFRS now? IFRS provides an opportunity for reduced complexity, greater transparency, increased comparability and improved efficiency to investors, capital markets and companies, which is why many countries, including the U.S. are either considering or are in the process of adopting IFRS. Another important reason to start considering IFRS today is because adoption of IFRS in the U.S. is likely inevitable. On Aug. 27, 2008, SEC Commissioner Elisse Walter said, "The world should make no mistake: The SEC is serious about moving to IFRS as the governing accounting standards."

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Tags: International Financial Reporting Standards, International Standards for Financial Reporting, SEC Rules, Compliance, Accounting, IFRS, SEC, GAAP