Moving forward with plans to converge U.S. generally accepted accounting principles with international financial reporting standards, the Financial Accounting Standards Board expects to crank out a host of related proposals in the second half of 2007.Even as the Securities and Exchange Commission proceeds to explore the possibility of allowing foreign companies to use financial reports prepared under IFRS to list on U.S. capital markets, FASB and the International Accounting Standards Board are working together to produce standards that are identical or very similar.

IASB member Jim Leisenring, who serves as the FASB liaison to his board, described the convergence progress as "slow and steady," but he denied rumors that the project is due to be completed by the end of 2008.

"It is absolutely disingenuous for people to be saying - and God knows where the press is getting this - that there will be a single set of standards in place by 2009," Leisenring said. "Those are people who have never looked at the technical plan of either board."

A memo of understanding between the two standard-setters, which was signed in February 2006, outlines specific steps that each standard-setter must take, and calls for several of the more basic convergence projects to be completed by the end of 2008. However, it warned that other convergence projects would take longer.

Meanwhile, the preparers of financial statements are looking forward to the day when the world uses a single set of accounting standards.

Paul Sharman, president and chief executive of the Institute of Management Accountants, is among those who have repeatedly called for global standards. "The U.S. is out of alignment with some of the world's most rapidly growing economic centers, but it seems like the wheels are finally in motion to correct this," he said.

Sharman would like to see the U.S. simply adopt IFRS, but FASB's current mandate is to converge the international and American standards to improve on both - but not necessarily by 2009.

Perhaps the most important part of the convergence project is the conceptual framework, the philosophical underpinnings of all future standards.

The boards at both FASB and the IASB are tackling the project in several phases.

FASB issued a preliminary views document last year on the first phase, on the objectives and qualitative characteristics of financial information. It has been redeliberating since February, and expects to issue a draft in the third quarter of this year.

The board will not issue a discussion paper on the "elements and recognition" phase until the middle of 2008. In the meantime, it will discuss the "measurement" phase. A preliminary document on "reporting entity" will be circulated after the second quarter of 2007.

WAIT - THERE'S MORE!

FASB and the IASB are also redeliberating three parts of a business combinations project. One will clarify the application of the acquisition method; another will clarify classification of non-controlling interests in consolidated statements. Under current standards, the IASB classifies these minority interests in equity, while FASB does not. The board may issue final statements on these aspects of business combinations early in the third quarter of 2007.

At the same time, the U.S. standard-setter is working on a related project on accounting for research and development assets acquired through a business combination, as well as by other transactions. It is also working on the accounting for the cost of R&D.

The two boards have also begun work on another stage of a broad project on accounting for financial instruments. As they grapple with instruments that have characteristics of both liabilities and equity, assets, or both, the boards are comparing three approaches: ownership-settlement, ownership, and re-assessed expected outcomes. A preliminary views document will present the concepts in the third quarter of 2007.

Investors are looking forward to a fourth-quarter preliminary views document on financial statement presentation. The IASB and FASB are in the process of talking with investors and the preparers of financial reports to discuss the issue. The boards are also discussing accounting for leases, though a preliminary document is not expected until 2008.

In a deep and far-reaching project on revenue recognition, the boards are developing conceptual guidance that should eliminate inconsistencies and fill voids in existing standards. The boards hope to issue a preliminary views document that introduces two revenue models by the fourth quarter of 2007.

FASB and the IASB also are working on reducing differences between American and international accounting for income taxes that have been resulting

in non-comparable financial information. An exposure draft is planned for the fourth quarter of 2007.

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