If the plans of the Financial Accounting Standards Board come to fruition, 2007 will represent a historic year in international accounting - a giant leap forward in global financial efficiency.It was just four years ago that FASB and the International Accounting Standards Board decided to get serious about their efforts to converge U.S. and international standards. They planned to move ahead on two fronts: one toward the short-term convergence of relatively simple issues, the other toward convergence of issues that were either relatively complex or controversial.

At some point, the overall convergence will result in U.S. generally accepted accounting principles and international financial reporting standards being so similar that the U.S. Securities and Exchange Commission would no longer require the latter to be reconciled with the former for foreign companies that wish to register in U.S. financial markets.

For good reason, Sue Bielstein, FASB's director of major projects, said that her board is making "solid progress." It has racked up an impressive list of converged standards, and the schedule of upcoming progress is even more impressive.

The short-term convergence is just about done. The board has amended existing standards on inventory costs, asset exchanges, and accounting changes and errors corrections. The board also is expected to wrap up the last of the short-term convergence projects that are in progress. The first quarter should see a standard that eliminates many differences in accounting for fair value options. An exposure draft on income taxes is expected in the second quarter, and final statements on earnings per share and subsequent events should be issued by the end of the year.

The second quarter should also see final joint statements on two aspects of business combinations: non-controlling interests and applying the acquisition method.

As the boards complete these final short-term projects, they will have to decide whether to add a project on impairment to the agenda. While they may take on that project, they are not expected to take on others in the foreseeable future as they turn their attention to bigger issues.

These bigger projects are unlikely to move as quickly or as easily as the smaller ones.

SO MUCH INPUT ...

"Bringing about a major improvement to financial reporting is difficult, whether you are working with one jurisdiction or many," Bielstein said. "If you look at the history of the board, bringing about changes in pensions and [other post-retirement employee benefits] accounting, derivative accounting, share-based payment accounting - those types of step improvements are always difficult, and I think it becomes as challenging when you try to bring about that kind of change on an international platform. It's a challenge to work with 21 board members and bring together the 90 or so jurisdictions. But the challenges are worthwhile."

The move into the thicker, thornier issues will begin with a series of exposure documents - a preliminary views document on liabilities and equity, and another on financial statement presentation, both expected in the second quarter of 2007. By the end of the year, a PV on revenue recognition should be available for comment.

All of which should make 2008 an even more interesting year, as public comments come in from around the world and the two boards begin hammering out final statements.

The most important project is also the most difficult and long-term - the effort to construct a conceptual framework, the philosophical fundamentals of accountancy on which all future standards will be based.

The power and importance of this worldwide framework is staggering.

"If I think about what project is most important in bringing about decision-useful financial reporting information in a converged way, it's the conceptual framework," Bielstein said. "Working together to develop and articulate sound, fundamental concepts that all future standards will rely on is of strategic importance for both boards."

Last year, the boards issued a preliminary views document on the objectives and qualitative characteristics of financial reporting. If redeliberations go well, an exposure draft may be issued in the third quarter of 2007. By the fourth quarter, a PV on elements and recognition should be issued for comment.

Bielstein emphasized one concept that underlies even the conceptual framework itself: "Improve, converge and simplify," she said. "We're always looking to do those three things. When we take on a convergence project, we're always thinking about the other two."

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