The Financial Accounting Foundation said Tuesday that it will contribute up to $3 million to the International Financial Reporting Standards Foundation to help complete some of their joint accounting standards convergence projects.
The Financial Accounting Standards Board, which the FAF oversees, and the International Accounting Standards Board, which the IFRS Foundation oversees, have yet to issue long-awaited converged standards for revenue recognition, leasing, financial instruments and insurance contracts. The revenue recognition project is the closest to completion and is expected sometime in the first half of the year.
The FAF Board of Trustees made the decision to help provide the non-recurring funding in consultation with senior officials of the Securities and Exchange Commission.
The contribution, to be made in up to three payments of $1 million during 2014, is intended to support the IASB, during the period that it is completing work on the four joint accounting standards projects it is undertaking with FASB.
“Completing these joint projects clearly is in the best interests of FASB stakeholders, including all of those around the world who invest in U.S. capital markets,” said FAF chairman Jeffrey J. Diermeier in a statement.
The contribution to the IFRS Foundation will come from the FAF’s reserve fund.
The FAF trustees made one previous contribution of $500,000 to the IFRS Foundation in 2011. In addition to the cash contribution, FASB over the past dozen years has dedicated much of its technical staff’s time to the convergence projects.
IFRS Foundation officials have urged the U.S. to provide more funding for the convergence effort. In an October 2012 response to the SEC’s final staff report on the IFRS work plan, which pointed out a number of problems with IFRS development and its funding mechanism, the IFRS Foundation trustees wrote, “Another result of the lack of a publicly sponsored funding arrangement is that the U.S. has to date not contributed a proportionate amount to the IFRS Foundation’s budget. Currently, a proportionate U.S. contribution based on GDP (the primary indicator used by the IFRS Foundation to assess the funding expectations of a country) would amount to just over £4 million [$5.46 million], however, only £1.3 million [$1.77 million] is currently expected to be collected from U.S. sources in 2012. We note that, while around 2025 percent of the total seats in the Foundation’s different bodies are currently held by the U.S., the U.S. contributions amount to less than 10 percent of the total country contributions to the Foundation’s budget. Ultimately the lack of public funding in the U.S. can only be resolved by the U.S. authorities themselves, directly or indirectly.”
FASB and the IASB have been working together to more closely converge U.S. GAAP and IFRS since they jointly signed the so-called "Norwalk Agreement" in 2002.
The American Institute of CPAs praised the FAF’s commitment. “The Financial Accounting Foundation’s decision to make a contribution to the International Accounting Standards Board to complete the four joint projects is an important step in further advancing the convergence work of IASB and FASB,” said AICPA president and CEO Barry Melancon in a statement. “We commend FAF for doing so. We hope it serves as a catalyst for a broader discussion by all parties in the financial reporting process on how IFRS should evolve in the United States.”