by Glenn Cheney

London - The Financial Accounting Standards Board has contributed rather generously to the International Accounting Standards Board, offering a model of excellent accounting standards in addition to expert personnel.   Three FASB folks have crossed the pond from FASB’s Norwalk, Conn., headquarters to the IASB’s London office. Former board members Tony Cope and James Leisenring are now board members of the 14-member IASB, and former FASB project manager Wayne Upton serves as IASB’s director of research.   All three appear pleased with their expanded horizons, though they also report that things aren’t quite the same.   "In many respects, it’s hard to distinguish between the two jobs," said Leisenring. "Very much of it is the same thing. The same issues are in question. The most significant difference is the advantage that the FASB has of being in one location so that the seven board members can interact and talk anytime they want. That privilege just isn’t here."   The privilege isn’t there because the international board members tend to spend about half their working days in their respective countries. Leisenring generally spends two weeks per month in his London office and two weeks at FASB, where he keeps tabs on what the Americans are doing and keeps the Americans informed of what the international board is doing.   The objective is to keep American and international standards as close to identical as possible, with the ultimate objective of attaining eventual convergence.   Tony Cope works out of his two home offices - one in Vermont during the winter and one in Massachusetts during the summer. Cope is quick to point out that he does not represent American interests on the international board. "I represent investor interests, as I did at FASB," he said.   By the IASB’s charter, board members are chosen according to their backgrounds, with representatives from the preparers of financial statements, auditors, the users of those statements, academia and the accounting profession. Leisenring represents the latter.   Three other Americans serve on the international board: IASB vice-chairman Thomas E. Jones, a former trustee of the Financial Accounting Foundation; Mary Barth, Atholl McBean Professor of Accounting at Stanford University, and Robert Herz, PricewaterhouseCoopers’ North American Leader of Professional, Technical, Risk and Quality.   Other IASB members hail from the United Kingdom, Canada, Australia, South Africa, Germany, France, Japan and Switzerland.   Wayne Upton began his career at FASB as a practice fellow 17 years ago. He was a senior project manager when he left to join the IASB in June of last year. He says that the big difference between the day-to-day operations of the two boards is that the IASB is designed to be virtual, that is, conducted over the phone and Internet by board members who spend most of their time in their home countries. They meet in London only for the monthly week-long public board meetings.   Both Cope and Leisenring praise their fellow board members and the staff. Leisenring terms the staff "excellent," and Cope considers them "first class." Both admire the members of the board for rising above national politics. The closest thing to political struggle is the struggle to consider every country’s regulations.   "Every once in a while you get some issues in an international context that are driven almost exclusively by local regulation," Leisenring said. "The regulatory nuances are sometimes a frustration, but that’s just part of dealing with a worldwide product. I’m not whining about it. It’s just something that many people don’t know we’re dealing with."   The real politics aren’t national, but sectorial. As at FASB, the preparers of financial statements can come up against the wishes of the users of those statements. A classic battle is shaping up over the IASB’s "Accounting for Share-Based Payment" project.   FASB grappled with a similar project in the early 1990s. That project, on employee stock option compensation, brought stiff resistance from corporations, which rallied the United States Congress and the big audit firms to the cause. Ultimately, FASB backed down from the standard that it had initially proposed.   Cope and Leisenring were with FASB then, and both supported expensing the estimated value of stock option compensation on income statements, the part of the proposal that had stirred the corporate ire so much. The IASB is now leaning hard toward a similar requirement, and the corporate sector, at least in the United States, is already gearing up to resist.   Cope and Leisenring may, therefore, soon find themselves in a familiar struggle, this time with 12 board members beside them and a whole world of companies, investors and governments involved in the planetary debate.   "It’s absolutely no different than it was eight years ago," Leisenring said. "The arguments haven’t changed, the issues haven’t changed and the legitimate issues are still over measurement. But too many people don’t want to focus on that at all."   Leisenring said that the first real test of the IASB hasn’t come yet, but it’s just around the corner. By the middle of this year, the board will issue a dozen exposure drafts. Nine of them are just adjustments to existing international standards, but the other two are expected to draw international attention. One is on consolidations, the other a substantive amendment to the extant standard on financial instruments.   The two boards are working jointly on the business combinations projects and hope to produce identical standards. On financial instruments, the IASB is reaching conclusions that are different from those of U.S. and U.K. generally accepted accounting principles, and there may be a few dissenting votes on the international board. Derecognition and securitizations are the most controversial points.   The boards are also working on performance measurement, debt equity and business combinations projects.   If international response to the board’s first proposals is its first test, its ultimate test will come when the Securities and Exchange Commission broaches the decision to accept or reject international standards. The European Commission has already agreed to accept IASB standards in 2005, and presumably much of the rest of the world will accept them by then.   Leisenring said that the world’s goal is a convergence of accounting standards. "Convergence means that sometimes you have to change. The American answer isn’t necessarily the right one. It isn’t necessarily the wrong one, either," he added.   Upton said that the rest of the world may be moving ahead while U.S. companies cling to U.S. GAAP.   "I don’t expect any rush by U.S. companies to adopt IASB standards, but their competitors and peers will be moving in that direction," Upton said from his London office. "It seems to me that a CFO, accounting policy officer or investor relations officer can no longer afford to be ignorant of international standards."

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