The Financial Accounting Standards Board and the International Accounting Standards Board said they intend to prioritize the major convergence projects ahead of them as they try to reach the goal of melding U.S. and international accounting standards, with some projects pushed back further next year.

Mary Schapiro

The two boards indicated Wednesday they want to focus more sharply on the issues and projects that they believe will bring about significant improvement and convergence between International Financial Reporting Standards and U.S. GAAP. The two boards committed last November to redouble their efforts to reconcile the major differences in accounting standards by June 2011 by meeting on a monthly basis in person and by video conference.

However, FASB Chairman Robert Herz indicated this week that the goal may slip by about six months (see FASB Pushes Back Convergence Target Six Months). One of the problems is that groups like Financial Executives International have told the boards that the large number of exposure drafts and proposed accounting standards updates expected in the next few months would be too much to absorb and respond to with comments (see Finance Execs Fret over Accounting Standards Overload).

“As noted in our March 2010 progress report, we recognize the challenges that arise from seeking effective global stakeholder engagement on a large number of projects,” the two boards said in a joint statement Wednesday. “Since publishing the March progress report, stakeholders have voiced concerns about their ability to provide high-quality input on the large number of major exposure drafts planned for publication in the second quarter of this year.”

The IASB and the FASB said they are in the process of developing a modified strategy to take account of these concerns that would prioritize the major projects in their memorandum of understanding. They said they would stagger the publication of exposure drafts and related consultations (such as public roundtable meetings) to enable broad-based and effective stakeholder participation in due process, which they noted was critically important to the quality of their standards.

“We are limiting to four the number of significant or complex exposure drafts issued in any one quarter,” they said.

The two boards also plan to issue a separate consultation document seeking stakeholder input about effective dates and transition methods.

The two boards said their newly modified strategy would still retain the target completion date of June 2011 for many of the projects identified by their original agreement, including those projects where a converged solution was urgently required.

However, the target completion dates for a few projects have extended into the second half of 2011, they acknowledged. “The nature of the comments received on the exposure drafts will determine the extent of the redeliberations necessary and the timeline required to arrive at high quality, converged standards,” they said.

The IASB and the FASB said they have begun discussions on this proposed strategy with their respective oversight bodies and regulators, including members of the IASC Foundation Monitoring Board.

They added that they do not expect the new schedule to negatively impact the Securities and Exchange Commission’s work plan, announced in February, which will consider in 2011 whether and how to incorporate IFRS into the U.S. financial system.

The boards expect to publish shortly a progress report that includes a revised work plan of their own.

SEC Chair Mary Schapiro gave her blessing to the new timeline. "The boards believe that the modified plan will contribute to increased quality in the standards because it provides additional time for stakeholders to thoroughly consider the proposals and give both boards quality feedback. I view this as time that is well invested,” she said in a statement.

"Quality financial reporting standards established through an independent process are threshold criteria against which the Commission's future consideration of the role of IFRS in the U.S. reporting system will be based,” she added. “I foresee no reason that the adjustment to the targeted timeline for certain joint projects should impact the staff's analyses under the work plan issued in February 2010, particularly when that adjustment is designed to enhance the quality of the standards. Indeed, focused efforts on those standards the boards consider highest priority for the improvement of U.S. GAAP and IFRS will facilitate the staff's analyses."

"Accordingly, I am confident that we continue to be on schedule for a Commission determination in 2011 about whether to incorporate IFRS into the financial reporting system for U.S. issuers,” said Schapiro.