The action by the Securities and Exchange Commission paves the way for a related change that would allow public companies, when reporting financial results, to choose between international and U.S. accounting standards.

The first step taken by the SEC on Wednesday would eliminate a requirement for foreign companies to "reconcile" their financial results with U.S. standards called generally accepted accounting principles, or GAAP. Foreign companies, which already adhere to international financial reporting standards, or IFRS, say the SEC mandate is burdensome and costly.

Eliminating the mandate "will signal the (SEC's) commitment to both investors and to the global capital markets," John White, director of the SEC's corporation finance division, said Wednesday. The commissioners voted 5-0 in proposing to ease the accounting requirement.

The change, which awaits formal adoption after a public comment period, would apply to 2008 annual reports, which are submitted in early 2009.

Some analysts say eliminating the GAAP reconciliation requirement - and perhaps giving all companies their choice of accounting systems - would make it harder for investors to evaluate companies' financial results and compare them.

The IFRS system is generally considered more flexible. The standards are deemed especially desirable for large U.S. companies with foreign subsidiaries, which now must maintain two different sets of books.

In an age of increasingly globalized financial markets, the SEC commissioners are treading a delicate line between the desired goal of luring foreign companies to U.S. markets and the need to uphold standards and protect investors. Their deliberations come after months of intense public debate over corporate internal-control rules under the Sarbanes-Oxley anti-fraud law that arose from the 2002 business scandals.

Also at their meeting Wednesday, the SEC commissioners [adopted] a rule allowing investors to choose between receiving annual proxy materials from companies on paper or electronically.