The International Accounting Standards Board and the Financial Accounting Standards Board have updated their 2006 memorandum of understanding and set a goal of completing their major joint projects on convergence of International Financial Reporting Standards with U.S. generally accepted accounting principles by 2011.
The convergence work is being sped up in part because of the Securities and Exchange Commission's proposed roadmap for moving U.S. companies' financial statement reporting from GAAP to IFRS starting in 2014. The state of convergence between the two sets of standards will be one of the milestones that the SEC will take into account at a meeting in 2011 before finalizing the roadmap.
IASB Chairman David Tweedie noted that other countries have their own convergence plans set for 2011. "A number of jurisdictions, including Canada, India, Japan and Korea, have announced plans to adopt or converge with IFRS from 2011," he said in a statement. "Completing the MoU beforehand will avoid the need for those jurisdictions to make major changes shortly afterwards as MoU projects are completed."
Among the major issues set for convergence in 2011 are financial statement preparation, leases and revenue recognition. FASB Chairman Robert Herz (pictured) said the two boards would decide by the end of this year whether to modify their short-term convergence program to focus more on the major improvement efforts. "We will continue our dual objectives of working toward global convergence while addressing reporting issues of critical importance to U.S. investors and financial markets," he said in a statement.
In some cases, FASB may simply adopt IFRS standards in areas such as accounting for taxes, investment properties, and research and development. However, the rush toward adoption of IFRS has attracted opposition, including from a member of the Public Company Accountability Oversight Board whose term expires next month. At a conference sponsored by the New York State Society of CPAs, Charles Niemeier warned, "IFRS has the potential to de-link us from our regulatory model," according to Reuters. He supports convergence of the accounting standards, but not outright adoption of IFRS.
