Despite the proliferation of capital market platforms across the globe, the U.S. continues to stand out as the most attractive and successful destination for raising capital. With its deep liquidity, robust investor base, and mature regulatory infrastructure, the U.S. capital markets offer unparalleled access to capital for companies worldwide – from Australia and Asia to Europe and the Middle East.

However, entering the U.S. capital markets is not without its complexities. Companies seeking to list or raise funds in the U.S. must navigate a rigorous regulatory landscape, particularly if they are classified as foreign private issuers (FPI) and subject to the Securities and Exchange Commission’s (SEC) filing requirements applicable to FPIs. To qualify as an FPI, a company must be incorporated outside the U.S. and meet specific thresholds regarding U.S. ownership and governance. Once qualified, FPIs benefit from tailored SEC filing forms – such as Form F-1 for IPOs and Form 20-F for annual reports – and are allowed to report under IFRS as issued by the IASB, without reconciling to U.S. GAAP, provided the accounting policy note and the auditor’s report clearly state compliance with IFRS as issued by the IASB.

Importantly, the ability to report under IFRS is contingent on maintaining FPI status. If an issuer becomes a U.S. domestic registrant, an IFRS to U.S. GAAP conversion is required. This is most commonly seen in SPAC transactions, where a foreign operating company merges with a U.S. domiciled SPAC and the surviving public entity is a U.S. registrant, at which point IFRS reporting is no longer permitted. IFRS to U.S. GAAP conversion may also be triggered by corporate re domiciliation, changes in ownership or governance that cause the issuer to fail the FPI tests, or other structural changes.

If an FPI’s financial statements are prepared under home‑country GAAP (i.e., not IFRS as issued by the IASB), the issuer may need to reconcile to U.S. GAAP in SEC filings; many issuers therefore choose either IFRS (IASB) or U.S. GAAP to streamline reporting. This process involves more than just accounting adjustments; it touches systems, controls, and internal processes. Conducting a thorough gap analysis identifies impacts early and helps ensure your organization is operationally prepared for the transition.

Additionally, financial statements included in SEC registration statements and annual reports are generally required to be audited by a PCAOB‑registered audit firm. PCAOB audits are performed under PCAOB standards and include procedures over relevant controls; separate internal controls over financial reporting audit requirements may apply depending on the issuer’s filer status and applicable exemptions.

Companies must also be mindful of the Holding Foreign Companies Accountable Act, which links continued U.S. market access for foreign issuers to the PCAOB’s ability to inspect their audit firms.

A closer look: Aligning financial reporting from local to international standards

When companies from around the world prepare to go public in the United States, one of the most critical steps is aligning their financial reporting with internationally recognized standards – typically IFRS as issued by the IASB. This often involves converting from local GAAP, and companies should understand how IFRS compares to both U.S. GAAP and their home country’s standards. Below are some examples of common GAAP accounting differences.

Revenue recognition is a major area of focus. While IFRS 15 and U.S. GAAP’s ASC 606 are largely aligned, they differ in how they assess variable consideration. IFRS uses a “highly probable” threshold, while U.S. GAAP uses “probable,” which can impact timing of revenue recognition. Some local GAAPs may still include industry-specific or legacy guidance that has not been fully converged with IFRS 15 or ASC 606. In such cases, companies may need to update their existing revenue policies more substantially as part of the transition to global capital-market reporting requirements.

Lease accounting also presents challenges. IFRS 16 requires nearly all asset and property leases to be recorded on the balance sheet using a single-lessee model. In contrast, U.S. GAAP (ASC 842) retains a dual model that distinguishes between operating and finance leases; however, both are recognized on the balance sheet for lessees, with the primary difference in the income statement pattern of recognition, with IFRS generally resulting in stronger reported EBITDA due to the separate classification of interest expense. Many local GAAPs still allow off-balance-sheet treatment, making this a significant area of change.

Financial instruments under IFRS 9 are classified and measured differently than under U.S. GAAP, and the impairment model is based on expected credit losses. In many jurisdictions, local GAAP frameworks vary significantly in their treatment of financial instruments, particularly in areas such as fair value measurement and impairment.

Intangible asset impairment is a key difference. IFRS generally applies a one‑step, fair value-based impairment model. Under U.S. GAAP, if indicators of impairment arise, goodwill impairment is measured using a one‑step test, while long‑lived assets follow a recoverability test and then fair‑value measurement if impaired. Under U.S. GAAP impairment losses are not permitted to be reversed. Under IFRS, reversals of impairment charges are permitted based on changes in facts and circumstances surrounding the value of the asset over time.

Inventory valuation also varies. IFRS prohibits the use of LIFO (last-in, first-out), while U.S. GAAP permits it. Local GAAPs may allow a range of methods, but transitioning to IFRS often requires changes in valuation approach and related disclosures. Also, under U.S. GAAP, inventory obsolescence is measured by valuing inventory at the lower of historical cost or net realizable value, and impairment losses are not permitted to be reversed. Under IFRS, reversals of inventory obsolescence reserves are permitted based on changes in facts and circumstances surrounding the value of the inventory over time.

Software development costs are capitalized under IFRS when the criteria in IAS 38 for the development phase are met. Under U.S. GAAP, most research and development costs are expensed as incurred under ASC 730, although notable exceptions exist, such as for certain software development costs and internal‑use software. As a result, the treatment of development expenditures can differ significantly across frameworks, affecting reported earnings and asset balances.

Provisions and loss contingencies differ in both recognition and measurement. IFRS (IAS 37) uses a more likely than not threshold and measures provisions at the best estimate, often the midpoint of a range. U.S. GAAP (ASC 450) generally requires a higher probability threshold and records the low end of the range when no amount is more likely.

In business combinations, IFRS and U.S. GAAP are broadly aligned but differ in technical areas such as the treatment of noncontrolling interests, contingent consideration, and acquisition‑related costs. Also, in some jurisdictions, local GAAP frameworks may still rely on book‑value or non‑fair‑value approaches, particularly for certain types of transactions. IFRS also does not permit push-down accounting, which is required under SEC regulations. Particularly relevant for carve outs and pre IPO entities, the SEC generally expects owner paid expenses to be reflected in the registrant’s financial statements with an offsetting capital contribution, ensuring the financial statements present the full cost of operations. IFRS does not contain equivalent SEC specific guidance, and local GAAP practices may vary, requiring careful assessment when preparing financial statements for U.S. capital markets.

Investments and equity method accounting can also differ between IFRS and U.S. GAAP. For minority investments below the level of significant influence, U.S. GAAP may allow measurement at cost when fair value is not readily determinable, while IFRS generally requires fair value measurement, either through earnings or OCI. However, under SEC regulations, all investments in partnership structures such as LLCs and LPs are required to be accounted for under the equity method of accounting regardless of whether the ownership interest is lower than 20%. Furthermore, investments in partnerships and similar structures may result in different consolidation conclusions, as U.S. GAAP applies a detailed VIE model, whereas IFRS relies on a single control framework. While both frameworks use the equity method when significant influence exists, differences in application and scope exceptions can affect reported earnings and balance sheet presentation.

Share-based payments under IFRS 2 and ASC 718 differ in classification rules and the treatment of vesting conditions. In many jurisdictions, local GAAP guidance is less detailed or less prescriptive, requiring companies to enhance existing models or develop new processes when transitioning to global standards.

Income taxes also diverge. U.S. GAAP includes a detailed framework for uncertain tax positions (ASC 740/FIN 48). IFRS addresses uncertainty in income taxes through IAS 12 principles and IFRIC 23, which can yield differences in recognition and measurement. Also, US GAAP provides for a gross presentation of deferred tax assets and liabilities, with a separate valuation reserve for the net deferred tax assets considered to be nonrecoverable. Under IFRS, any nonrecoverable portions of deferred tax assets are written down directly for a net presentation of the recoverable balances.

Final thoughts

Successfully entering the U.S. capital markets requires more than just ambition; it demands strategic preparation, technical accounting expertise, and a deep understanding of regulatory expectations. Whether you have determined the FPI designation or becoming a U.S. domestic registrant as your path forward, restating your historical financial statements to align with the appropriate accounting frameworks, navigating PCAOB audit requirements, and preparing for the additional governance and compliance requirements of being a publicly traded company in the U.S. are essential steps in building investor confidence and helping ensure compliance. By proactively addressing these challenges, companies can unlock the full potential of the U.S. capital markets and position themselves for long-term global growth. 

Companies considering a U.S. listing should begin early, engage experienced advisors, and invest in early financial reporting readiness – whether under IFRS or U.S. GAAP – to support a successful U.S. market entry.