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On September 10, 2025, the Chairman of the United States Securities and Exchange Commission (SEC) made the keynote address at the Inaugural OECD Roundtable on Global Financial Markets. In the address the Chairman referenced the foundation of any effective securities regulatory regime as high-quality accounting standards and financial materiality. The SEC currently allows foreign private issuers (FPIs), including Canadian public company FPIs, to prepare financial statements under International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB) without reconciliation to United States Generally Accepted Accounting Principles (GAAP).
The Chairman indicated that in 2007, when the SEC determined to allow IFRS financial statements, the SEC had indicated “the IASB's sustainability, governance and continued operation in a stand-alone manner as a standard setter are significant considerations in eliminating the reconciliation requirement, as those factors relate to the ability of the IASB to continue to develop high-quality globally accepted standards,” and that the SEC had specifically noted the ability of the IFRS Foundation to obtain “stable funding” for the IASB.
With the formation of the International Sustainability Standards Board (ISSB) as a sister organization to the IASB under the IFRS, the IFRS is now responsible for securing funding for both the IASB and the ISSB. The Chairman encouraged the IFRS to prioritize the IASB over the ISSB in ensuring full and stable funding, stating “this recent expansion of the IFRS Foundation's remit cannot divert its focus from its long-standing core responsibility of funding the IASB. In turn the IASB must promote high-quality accounting standards that are focused solely on driving reliable financial reporting and not used as a backdoor to achieve political or social agendas” which he referenced as “specious and speculative issues.” If this is not the case, then the Chairman indicated the SEC may need to engage in a retrospective review of its decision to accept IFRS financial statements without reconciliation.
It is worth noting that another current SEC Commissioner made comments along the same line in a letter to the IFRS Foundation in 2021 when the IFRS Foundation was establishing the ISSB. In that letter, the Commissioner referenced the potential to improperly equate sustainability standards with financial reporting standards. “Plans to weave sustainability standards and financial reporting standards together are less likely to create synergies than to make it more difficult for investors to analyze financial reports by eroding the standards that undergird – and hence the objectivity, reliability, and comparability of – those reports.”
The IFRS Foundation reportedly depends a lot on voluntary financial contributions and so funding tends to be a perpetual issue. The comments of the SEC Chairman suggest the SEC will be watching carefully the allocation of available funds, and potentially forming its own view on that allocation.
The September 2025 remarks from the Chairman of the SEC follow the Canadian Securities Administrators' (CSA) announced pause on consideration of mandatory climate-related disclosure rules. When the CSA again picks up its consideration of mandatory rules, we'll be watching whether the Chairman's remarks influence how the CSA reflects the Canadian Sustainability Standards Boards' standards in those mandatory rules.
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