The U.S. Securities and Exchange Commission (SEC) may reconsider its rules allowing foreign companies to file financial statements using International Financial Reporting Standards (IFRS) due to the IFRS Foundation’s formation of the International Sustainability Standards Board (ISSB), according to a warning issued by SEC Chair Paul Atkins.
Speaking at the inaugural OECD Roundtable on Global Financial Markets, Atkins highlighted this development as part of a broader series of SEC actions since the Trump administration, pushing back against increasing global requirements for corporate sustainability and climate reporting. This includes a recent announcement that the SEC would not defend its climate reporting rules in court, which were established during the Biden administration.
The IFRS Foundation launched the ISSB in 2021 to develop IFRS Sustainability Disclosure Standards, aimed at providing investors with information about companies’ sustainability risks and opportunities. The IFRS released its first general sustainability (IFRS S1) and climate (IFRS S2) reporting standards in June 2023, which have since been adopted by over 35 jurisdictions.
Upon the ISSB’s formation, the IFRS Foundation stated that it would operate alongside the International Accounting Standards Board (IASB), with both boards overseen by the IFRS Foundation Trustees. The boards are intended to be independent yet collaborative, establishing standards to deliver comprehensive information to investors.
In 2007, the SEC removed the requirement for foreign issuers in the U.S. to reconcile financial statements with US GAAP if they were prepared using IFRS standards. Atkins, an SEC Commissioner at that time, supported this change, citing the IASB’s sustainability, governance, and stable funding as key considerations.
However, with the IFRS Foundation now securing funding for both the IASB and ISSB, Atkins expressed concerns that this expanded remit could detract from its primary responsibility of funding the IASB. He warned against using IFRS standards as a means to pursue political or social agendas. Atkins stated that if the IASB does not receive stable funding, the premise for the SEC’s 2007 decision might no longer hold, necessitating a review.
In response, an IFRS Foundation spokesperson emphasised that the ISSB was established due to global demand for sustainability-related financial disclosures. The IASB and ISSB operate independently, with no mutual obligations, while the Foundation is developing a long-term funding strategy.
Atkins also raised concerns about the EU’s new sustainability reporting and due diligence regulations, such as the CSRD and CSDDD, which adopt a double materiality approach. He noted these laws impact U.S. companies operating in the EU. Although encouraged by the EU’s commitment to ensuring these regulations do not hinder transatlantic trade, Atkins stressed the need to refocus regulatory regimes on financial materiality.
