Financial Accounting Standards Board chair Leslie Seidman said that many of the priority projects slated for convergence with the International Accounting Standards Board probably will not be settled until next year at the earliest.
In an interview with Accounting Today staff on Tuesday, Seidman commented on FASB’s progress in its convergence work with the International Accounting Standards Board, and the SEC’s eagerly anticipated decision on whether it will incorporate International Financial Reporting Standards into the U.S. financial reporting system. FASB and the IASB have repeatedly delayed the convergence timeline for their priority projects on revenue recognition, financial instruments, leasing and insurance contracts.
“We have been working with a very determined pace for a sustained period of time,” said Seidman. “And the changes that we have made to the timetable have been directly in response to the nature and the extent of the feedback that we have received on all of those proposals. This is a real process with real outreach and real consideration of the issues that have been raised. And the fact of the matter is that it takes time to work through these issues. The changes which we have made to the timetable, which we have made jointly with the IASB, have been very well received among the constituents who take this process seriously. They are very supportive of our strong commitment to making sure that we end up with improved standards here that are going to stand the test of time. Nobody wants us to rush through this process only to end up with a standard that needs to be amended and deferred. We want to maximize the likelihood that we have a smooth implementation of these new important standards when we feel that we have completed the process to our satisfaction.”
Seidman expects that the revenue recognition standard will be released for comment within a month and will be out for comment for 120 days. “That puts us somewhere in early 2012 for the redeliberations and then, depending on the feedback we get, our goal is to conclude that project in the first half of 2012,” she said.
FASB is currently nearing the completion of its redeliberation discussions with the IASB on the leasing project. “We are continuing to work through the issues that were raised with the exposure draft,” said Seidman. “We have already decided to re-expose that as well, which again was an extremely well-received decision because people do want an opportunity to look at the revised conclusions in the context of the standard as a whole. It’s one thing to hear about these decisions as they’re made, and it’s another thing to look at the whole standard and say, ‘Yeah, I think you got it right.’”
Once those discussions conclude late this fall, she said the leasing proposals would be re-exposed for 120 days with the IASB. “Likewise, we’re looking at a timeframe of sometime next spring to start the redeliberations on leasing, depending on the feedback that we get, and we’re looking at redeliberations after that, with a goal of trying to conclude leasing in 2012,” said Seidman.
The financial instruments project is currently dependent on the intense work that the two boards are doing on the impairment phase of those standards. The two boards have a meeting scheduled for Wednesday on impairment.
“I’m not going to put a specific timeframe on impairment at this point in time, but it is a very high priority of ours to work jointly with the IASB to try to come to a converged solution that will be widely recognized as an improvement in reporting on impairment, which most people think is the single biggest issue that we should be working on in response to the financial crisis,” said Seidman.
She added that the two boards are working at a determined pace, but it was premature to give a timeline for finalizing the impairment standards for financial instruments.
Seidman declined to give any predictions on the SEC’s decision on IFRS. “I’m not going to predict what the SEC will do,” she said. “The staff report that they issued a few months ago putting forward a possible approach on condorsement has been out for comment. The comment period has closed. They have received a significant number of comment letters on the proposal that express a wide range of views. I trust that the SEC will be looking through that commentary as well as other sources of feedback that they’ve been receiving and will continue to use a very thoughtful and deliberative process to come to a conclusion.”
Seidman added that the SEC has also publicly stated that it has two other progress reports that it is planning to issue soon. One will provide an analysis of the remaining differences between U.S. GAAP and IFRS, and the other will offer a review of how IFRS is being applied around the world and the way financial statements are prepared, particularly with a view toward the level of consistency in practice and anything that can be learned from that.
“For you to actually have consistent application of any accounting standard around the world requires coordination among the auditors and the regulators,” said Seidman. “I think that efforts are underway to have an international dialogue among regulators just to share information about how the standards are being applied and enforced. But beyond that, I think a significant effort needs to take place so at the end of the day there is consistent application and consistent reporting around the world.”