SEC Chief Accountant Jim Kroeker said the Financial Accounting Standards Board and the International Accounting Standards Board should proceed with their efforts to converge U.S. and international accounting standards, even though the SEC commissioners have not yet formally approved the proposed roadmap to International Financial Reporting Standards.
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Speaking on Friday at a conference on IFRS jointly sponsored by the American Institute of CPAs and the International Accounting Standards Committee Foundation, Kroeker urged standard-setters to look past the dispute over fair value vs. historical cost, and concentrate on providing transparency to investors in areas such as loans and credit losses.
I think its time for the accounting debate to turn away from whether its fair value or whether its historical cost, but to acknowledge that in some cases both sets of information are important, and then to discuss how best to portray them, he said.
Kroeker reiterated earlier statements that he and SEC Chair Mary Schapiro had made, indicating the SEC was turning its attention this fall to the proposed IFRS roadmap. When asked about the date, Kroeker said, There will be follow-up on the roadmap this fall. Asked to define the word fall, he noted that the season ends on Dec. 21.
But Kroeker emphasized that the accounting standard-setting boards should not wait for the SEC to make its decision on the final roadmap, and how the roadmap might change in light of the comments the SEC has received.
If the boards share the same objective to improve financial reporting, the boards have agreed that the projects that theyre working on are areas that need improvement, not just under U.S. GAAP but under IFRS, then I think convergence efforts should continue or would continue without an SEC finalization of the roadmap, he said. That isnt to say that it isnt important for us then to also determine the role of international reporting standards in the U.S., and I understand how that can help convergence efforts, but I dont think the absence of a decision should somehow impede efforts.
FASB Chairman Robert Herz and IASB Chairman Sir David Tweedie said at the same conference on Thursday that they are aiming to converge U.S. GAAP with IFRS by June 2011, the date recommended by world leaders at last months G-20 summit in Pittsburgh (see IASB and FASB to Meet Monthly on Standards Overhaul). The two boards plan to meet on a monthly basis, in person and by video conference, to resolve outstanding issues such as asset impairment and hedge accounting.
The two board chairmen plan to update their memorandum of understanding on their convergence efforts. Kroeker said his top priorities for the new MOU would be resolving the standards for financial instruments, revenue recognition, consolidation and derecognition, in that order.
Kroeker acknowledged that FASB had many issues to resolve, and he did not want to over-burden the board. He said that one of the lessons he had learned from the financial crisis was to be more cognizant of when to ask FASB to divert resources from its convergence efforts. Questions over standards might instead be resolved through other bodies such as the Emerging Issues Task Force, he noted, or companies might instead resolve them through disclosure, as in the Management Discussion and Analysis section of their financial reports.
IASB member James Leisenring discussed the thorny issue of revenue recognition that both boards are working to address. If you are familiar with the EITF agenda, you know that revenue recognition questions are ongoing, he said. They dont just go away.
U.S. GAAP and EITF guidance are followed around the world, he noted, because other countries need answers about how to deal with some of the unusual problems that emerge with revenue recognition. We are trying to converge, we are trying to simplify, and it would be nice if we could develop with clarity some principles for revenue recognition across various industries.