A new study has found that the Accounting Procedures Act (APA) of 2002 has changed the way foreign firms converge toward U.S. regulations. The APA requires foreign firms that list their securities on U.S. stock exchanges to file financial statements that comply with U.S. generally accepted accounting principles (GAAP). This has led to a significant increase in the convergence of foreign accounting practices with U.S. GAAP.

The study, which was conducted by researchers at the University of Michigan, examined the financial statements of foreign firms that listed their securities on U.S. stock exchanges before and after the APA was passed. The researchers found that, after the APA was passed, foreign firms were more likely to adopt U.S. GAAP and to disclose more information in their financial statements.

The study's findings are significant because they suggest that the APA has been effective in promoting the convergence of international accounting standards. This convergence is important because it makes it easier for investors and analysts to compare the financial statements of firms from different countries. It also reduces the cost of capital for foreign firms that list their securities on U.S. stock exchanges.

The study's authors conclude that the APA has been a success and that it should be used as a model for other countries that are considering adopting international accounting standards.

Key Findings:

* Foreign firms that listed their securities on U.S. stock exchanges after the APA was passed were more likely to adopt U.S. GAAP than foreign firms that listed their securities before the APA was passed.

* Foreign firms that listed their securities on U.S. stock exchanges after the APA was passed disclosed more information in their financial statements than foreign firms that listed their securities before the APA was passed.

* The convergence of foreign accounting practices with U.S. GAAP has made it easier for investors and analysts to compare the financial statements of firms from different countries.

* The convergence of foreign accounting practices with U.S. GAAP has reduced the cost of capital for foreign firms that list their securities on U.S. stock exchanges.

Recommendations:

The study's authors recommend that the APA be used as a model for other countries that are considering adopting international accounting standards. They also recommend that the SEC continue to monitor the convergence of foreign accounting practices with U.S. GAAP and to make adjustments to the APA as needed.