Overseas companies issuing securities in the United States may face a whole new set of accounting rules in the next few years, and experts urge corporate treasurers to begin monitoring the prospective evolution in the regulations now.

The US Securities and Exchange Commission is studying whether to require more foreign companies to submit financial disclosures using Generally Accepted Accounting Principles (GAAP). Currently, the US regulators allow foreign-based companies with US listings to book financials under International Financial Reporting Standards (IFRS), a more common benchmark in most of the world.

Last June, the SEC issued a document asking for public comment on various issues related to foreign issuers and what, if any, additional financial reporting and safeguards are needed. The move followed President Trump’s return to the White House and his choice of Paul Atkins to head the SEC.

The Trump administration has been critical of some IFRS reforms, including a shift towards environment, sustainability and governance (ESG) objectives and, allegedly, away from a laser focus on financial scrutiny.

The SEC has received scores of public comments on the initial document, but no formal proposal has been issued by the regulators yet. Even if the next regulatory stage results in a proposed rule, there would still be multiple stages of review, including a public comment period, before it could take effect. Experts say that would take at least two years probably.

“It’s important to understand that this is currently just a concept release, which is the very first step in an involved process to gather public input,” Regina Croucher, Head of International Activities at KPMG’s US office, told Treasury Today. “It is still in the very early information-gathering stage. A formal rule has not yet been proposed.”

One underlying catalyst for the concept release seems to be the proliferation of Chinese companies that have their corporate registration in the Cayman Island and are raising capital in the US, said Daniel Goelzer, retired SEC general counsel. For many of those companies, the bulk of their offices, employees, operations and customers are in China and they may be “lightly regulated” by China.

While that type of registration profile is drawing the most intense scrutiny, Goelzer ultimately expects that more overseas companies will need to file GAAP financial statements to satisfy the SEC’s new concerns.

The commission may tread more lightly in the end, because the Trump administration would prefer to avoid the unintended consequences. One effect could be driving investment out of the US. Another might be incentivising companies to raise capital using avenues with less scrutiny – contrary to the original intent of the current inquiry.

“If they are too strict here, the effect may be that they would just force these companies into the private markets,” warns Goelzer, who was a founding member of the Public Company Accounting Oversight Board (PCAOB).

If more companies indeed will be required to file GAAP financials, the cost of setting up a parallel accounting framework can run into millions of dollars.

“The primary challenges for US-listed overseas companies are cost and expertise,” Croucher said. “Converting from IFRS to US GAAP would require significant internal changes, including system revisions, increased training, and consequently, increased costs.”

At companies that have used IFRS for decades, there may be no one in the headquarters building who is intimately familiar with the US formats.

“A key challenge is the lack of in-house US GAAP expertise. Many companies would need to train existing staff or hire new experts to manage the complexity of maintaining multiple accounting frameworks, eg, IFRS for local reporting and US GAAP for SEC filings,” Croucher explained.

Even the exploration of the idea is likely to be mentioned in a joint survey now underway by the International Auditing and Assurance Standards Board, which issues the International Standards on Auditing (ISA), and the International Ethics Standards Board for Accountants. Part of the survey asks about regulatory developments and sustainability expectations. Underscoring the long-term nature of these questions, the 2026 survey is meant to help shape strategies for 2028-2031.

“Operationally, the audit process would become more complex, given the differences between PCAOB and ISA standards, and less efficient, as companies would have to simultaneously conduct integrated audits under two different sets of standards,” Croucher explained. Foreign private issuers “might need to convert their financial statements to US dollars, adding another layer of complexity.”

Atkins himself has offered a glimpse at what his SEC might emphasise in the coming years, not only with the concept release but also with broader IFRS priorities and US cooperation.

Atkins arrived back at the SEC last year with a history of supporting the accommodation that allows foreign companies to prepare financial statements under IFRS standards in lieu of GAAP reporting. However, in a speech at a Paris roundtable on global financial markets in September, Atkins expressed concerns about the direction of the IFRS priorities. Specifically, he said IFRS trustees must not divert resources away from the International Accounting Standards Board (IASB) to fund climate and sustainability initiatives.

“As we look with fresh eyes at the types of foreign issuers that receive special accommodations, we should also not lose sight of the bedrock beneath any effective regulatory regime: high-quality accounting standards and financial materiality,” Atkins said. He noted that the IFRS Foundation is required to secure proper resources for the IASB as a baseline duty.

“The IASB must promote high-quality accounting standards that are focused solely on driving reliable financial reporting and are not used as a backdoor to achieve political or social agendas,” Atkins urged in his September speech. “Reliable financial reporting is critical to supporting capital allocation decisions. We all have a strong interest in the IASB’s being fully funded and operational, and I encourage the IFRS Foundation to meet its goal for ‘stable funding’ that prioritises the IASB and its focus on standards for financial accounting, rather than specious and speculative issues.”

Atkins made it clear that there will be consequences for foreign issuers in the US if the SEC is not satisfied with IFRS commitments. Namely, more of them may be required to file GAAP financials.

“If the IASB does not receive full, stable funding, then one of the underlying premises for the SEC’s elimination of the reconciliation requirement for foreign companies in 2007 may no longer be valid, and we may need to engage in a retrospective review of that decision,” he warned.

An additional twist as US regulators and corporate F-suites map out the next few years of accounting practices is that IFRS is about to undergo its next iteration. IFRS 18 becomes effective in 2027. There will be a change, for example, in disaggregation of income statement expenses (DISE) effective for public business entities for annual periods after December 2026.

The best advice that I could give to a corporate treasurer at a foreign issuer is to keep track of the proposed regulation.

Daniel Goelzer, former SEC general counsel

“Looking ahead, upcoming standards impacting expense disclosures and/or expense presentation under both frameworks… will create further divergence, increasing reporting complexities and requiring potential system revisions for companies,” KPMG’s Croucher pointed out.

Any diversion of accountants’ focus away from their customary IFRS standards would be particularly significant around the world because more than three-quarters of non-North American firms had adopted IFRS as of 2022, up from 53% in 2011. David Koo, assistant professor of accounting at George Mason University, notes that IFRS continues to grow in adoption.

Koo was a co-author of 2025 research that examined the impact of having two major accounting standards around the world.

“People were concerned that IFRS’ influence would diminish if the US did not adopt, but it didn’t happen,” Koo said. “According to our survey, IFRS is thriving and has become the most widely used accounting standard.”

Nor did GAAP and IFRS become severely distinct over the decade. The SEC maintains a position on the IFRS monitoring board, and Americans are represented on the IASC. Discrepancies between the two frameworks seem to have peaked before 2012.

“The accounting boards work tightly together; they have corresponded in an active way for the past ten to 15 years,” Koo says. “It seems that they are learning from each other. They are separate. However, when they introduce new standards, they collaborate.”

There are still some important differences in approach between the two standards, as the Canada-based e-commerce platform Shopify points out in guidance to its vendors for 2026.

“GAAP is rule-based, meaning publicly traded US companies are lawfully required to follow its directives,” Shopify stated in a blog post. “On the other hand, IFRS is standards-based and leaves more room for interpretation and sometimes requires lengthy disclosures on financial statements.”

The differences are not just academic or a matter of which one requires more documentation. Some diverge on material issues including, for instance, revenue recognition. Shopify offers an example involving gift card redemption.

“When you sell a gift card or a prepaid subscription, the cash comes in, but you still owe the customer goods or services. It sits in your books as a contract liability,” Shopify explains. “Under GAAP, if your data shows that 5% of gift cards are likely to never be redeemed, you can recognise this 5% as revenue over time as cards are used. With IFRS, you generally have to wait longer and can only record that 5% as revenue when it’s very likely the customer won’t use the card, so revenue recognition is usually slower than under GAAP.”

There is a material impact: “Under IFRS, you can’t treat any of it as revenue until it’s almost certain the customer won’t redeem it, which takes longer.”

KPMG points out many other differences that affect actions ranging from lease accounting and electricity hedging to currency exchange and liability derecognition.

Beginning this year, IFRS provides new guidance related to corporate subsidiaries and companies affected by hyperinflation of the home currency. Some of the new IFRS rules require more detailed reporting than GAAP does, eg, granularity on financial statements.

“The changes, which mostly affect the income statement, include the requirement to classify income and expenses into three new categories – operating, investing and financing – and present subtotals for operating profit or loss and profit or loss before financing and income taxes,” KPMG writes in its semi-annual outlook published in December.

“US GAAP generally has no requirements to classify income and expenses by specific category, or present subtotals for profit or loss” except for “certain specialised industries.”

Why the differences between IFRS and GAAP in the first place? One reason is the financial crisis of 2008-09 and, which gave the SEC pause about fully embracing IFRS. GAAP seemed more restrictive and safer, but IFRS usage continued to proliferate elsewhere. Koo suggests now that “having two competing frameworks may even be a net benefit for cross-market comparability” with “managed divergence” offering unique insights.

“The primary distinction lies in their foundation: IFRS is sometimes viewed as being more principles-based, whereas US GAAP is sometimes viewed as more rules‑based,” Croucher adds. “This fundamental difference can create complexities and divergent outcomes even when the standards appear similar on the surface.”

The picture can become even more complicated when a company is operating under both mindsets.

“The complexity arises when principles under IFRS are applied instead of more specific rules under US GAAP, creating differences even when unintended,” Croucher said.

KPMG urges multi-national companies to explore potential ramifications if the SEC ultimately requires more GAAP reporting.

“The training required would be extensive, touching on many fundamental areas. The differences in accounting for financial instruments, leases, and asset impairments are particularly complex and would require significant effort to master,” Croucher said. “Navigating measurement, impairment, and classification considerations, eg, identifying the distinction between liability and equity, will be a primary challenge for financial instruments.”

There are many examples of accounting requirements that are handled differently under the IFRS and GAAP frameworks.

“Additional challenges include considering control factors to determine when an entity or investee should be consolidated, and understanding what constitutes a provision, as the concept of an ‘onerous contract’ is not recognised under US GAAP,” Croucher explained. “Logically, these differences can cause significant uplifts in training. For example, models for measuring impairments of non-financial assets are very different between US GAAP and IFRS, including whether or not an impairment can be reversed,” she emphasised.

Even where the two systems are asking for similar things, there can be important nuances that can take quite a while to learn for accounting professionals who are not accustomed to operating with both IFRS and GAAP – which, frankly, is most people. “You would have to at least bring in new auditors and financial advisers and accountants,” Goelzer predicts.

KPMG agrees that the two accounting standards are different enough that training needs to start well in advance of the actual need.

“Even in areas that are aligned on core principles and should result in converged outcomes, like lease accounting, major distinctions remain,” Croucher said. “While both US GAAP and IFRS have an overarching right-of-use model for lessees, the underlying dual-lease model in US GAAP, when compared to the single-model in IFRS, presents a significant learning curve for finance and audit teams.”

In the end, “these are not just technical differences” with little bottom line impact. Instead, “these divergent approaches can result in material differences in financial reporting and may impact key metrics that investors and analysts rely on, including net income, total assets and equity,” she said.

Most of the stakeholders agree that the SEC ultimately will move slowly and deliberatively, especially if a big change is in the offing. There are many steps before any proposed regulation can be adopted and put into effect. Many of the public comments acknowledge a desire to avoid rapid, sweeping reform.

“The feedback received has largely urged caution or, in many cases, suggested alternative ways to proceed, leaving the SEC’s timeline uncertain if it decides to move forward with a rule proposal,” Croucher said. “Major rulemakings at the SEC have traditionally taken 18-24 months to be finalised after a rule is proposed, a step that has not yet occurred.”

Goelzer, who was a Sustainability Accounting Standards board member from 2017 to 2022, said multinational companies should already be monitoring the SEC’s process and envisioning what new professional resources might be necessary under various scenarios.

“Foreign companies’ treasurers [should ask] how much it could affect our ability to raise capital and should we exit the United States?” Goelzer said. “The best advice that I could give to a corporate treasurer at a foreign issuer is to keep track of the proposed regulation, in particular after the specific proposals are ready,” Goelzer suggests.

He also mentions that you can become part of the process: “I think there could be specific proposals this year. Think about whether you would want to comment.”