IASB and FASB to Meet Monthly on Standards Overhaul
The International Accounting Standards Board and its U.S. counterpart, the Financial Accounting Standards Board, plan to meet on a monthly basis in order to achieve the goal of converging accounting standards by June 2011.
The chairmen of the two standards-setting boards told attendees at a joint conference of the American Institute of CPAs and the International Accounting Standards Committee Foundation in New York that they will be redoubling their efforts to reconcile the two sets of accounting standards, in some cases by rewriting them entirely over the next year-and-a-half.
IASB Chairman Sir David Tweedie and FASB Chairman Robert Herz held a three-day meeting at FASB headquarters in Norwalk, Conn., earlier this week to try to resolve thorny differences in areas such as fair value measurement, revenue recognition, asset impairment and financial statement presentation.
They reported that they made significant progress and set a series of milestones for when they expect to issue draft standards. In some cases, the IASB will hold off on making public its draft of certain standards until FASB issues its own proposals, in order to avoid confusion among accountants about which set of standards to follow. The boards intend to hold more joint face-to-face meetings, in some cases by video conference, in order to make faster progress.
Were going to work on these issues together every month, said Tweedie. Thats why we think well make our June 2011 target date.
The target date was set at the G-20 summit last month in Pittsburgh, in which world leaders encouraged the development of a single set of global accounting standards.
The Securities and Exchange Commission has not yet approved the proposed roadmap to adoption of International Financial Reporting Standards, but SEC Deputy Chief Accountant Julie Erhardt confirmed that the SEC commissioners are considering the roadmap this fall.
However, she would not say whether the roadmap would be approved by the end of this year, or whether the G-20 recommendations would play a significant role.
In the meantime, FASB is working on its convergence efforts with the IASB, and Herz said the board would soon publish an updated version of its memorandum of understanding with the IASB, which dates back to their so-called Norwalk Agreement in 2002. He said the two boards would also work on a joint standard for carbon emissions trading schemes.
Some of the major sticking points are standards for loans and financial securities. The two boards are going to be careful to keep even their draft standards in sync and may hold back some of them to avoid confusion. If we have different words, people will start interpreting them differently, said Tweedie. In some cases, companies will be able to adopt the draft IFRS proposals early, but they will have to be forewarned that the standards could change in the future, he cautioned.
However, FASB is continuing to receive requests for guidance on GAAP from the Big Four and other accounting firms at the same time it is working on convergence of GAAP and IFRS. Were devoting most of our attention to convergence, but were riding two horses, Herz said.
FASB recently made available its FASB Codification of U.S. GAAP standards, which is available in several versions, both for free and with extra software tools and "nifty bells and whistles" for a subscription price of $850 per year. Herz said the Codification adds clarification. Our literature is no longer nuts, he said. The content may be nuts.
Former Federal Reserve Chairman Paul Volcker also addressed the conference, and said it was time to move to international standards. He noted that the U.S. has to recognize the increasing globalization of the economy, and after financial debacles such as Enron, WorldCom, and Global Crossing, the U.S. can no longer claim to have the best set of accounting standards.
None of this is going to work without high levels of competence in the accounting profession, he said.
However, Volcker noted that the IASB and FASB would need to be responsive to the real-world concerns of businesses, and not consider their independence to be an excuse to step into a cocoon. However, he also said the boards should be strong enough to resist outside political pressure, and expressed the hope that the IASBs governance would provide that strength.
Tweedie similarly expressed the hope that a recently established monitoring board would help insulate the IASB from some of the continuing pressure it has been facing in Europe from the European Commission and the leaders of several countries who have been debating and questioning the boards standards.