CONVERGENCE WITH INTERNATIONAL ACCOUNTING STANDARDS
AICPA Communications | April 29, 2008
Background
- The Financial Accounting Standards Board (FASB) is working with the International Accounting Standards Board (IASB) to converge their respective accounting standards into a robust set of rules that will meet the needs of preparers and users in all global constituencies.
- After their joint meeting in September 2002, the FASB and the IASB issued their “Norwalk Agreement” in which they each acknowledged their commitment to the development of high quality, compatible accounting standards that could be used for both domestic and cross-border financial reporting.
- At that meeting, the FASB and the IASB pledged to use their best efforts (a) to make their existing financial reporting standards fully compatible as soon as is practicable and (b) to coordinate their future work programs to ensure that, once achieved, compatibility is maintained.
- At their meetings in April and October 2005, the FASB and the IASB reaffirmed their commitment to the convergence of U.S. generally accepted accounting principles (U.S. GAAP) and International Financial Reporting Standards (IFRS). A common set of high-quality global standards remains the long-term strategic priority of both the FASB and the IASB.
Current Status
- The FASB and the IASB have short-term international convergence projects. The overall objective of these projects is to improve both U.S. generally accepted accounting principles (GAAP) and International Financial Accounting Standards (IFRS) while concurrently eliminating a variety of individual differences between U.S. GAAP and IFRS.
- Projects falling under the heading of “short-term convergence” are limited to those that would address differences outside the scope of a major project for which convergence around a high-quality solution appears to be achievable in the short term, usually by selecting between existing IFRS and U.S. GAAP.
- In the current phase, the FASB addressed five areas: inventory costs; asset exchanges; accounting changes; earnings per share; and balance sheet classification. Concurrently, the IASB has deliberated several issues in the short-term convergence project.
- Information on recent developments in the project is available at www.fasb.org/project/short-term_intl_convergence.shtml.
- The FASB and the IASB also have announced a targeted long-term international convergence project covering such topics as revenue recognition, leases and fair value measurements.
- Most of the Boards’ major projects are being conducted jointly.
- A copy of the memorandum of understanding between the FASB and the IASB can be downloaded at www.iasb.org/Current+Projects/Memorandum+of+Understanding+with+the+FASB.htm.
- According to a worldwide survey of leaders of the accounting profession conducted by the International Federation of Accountants, convergence to a single set of international standards is a key to economic development. Of the 143 leaders from 91 countries who responded, 89 percent indicated that convergence to international financial reporting standards was “very important” or “important” for economic growth in their countries. Nine percent said it was “somewhat important,” and only 1 percent said it was not important. A summary of the survey findings, along with responses to the full survey, may be found at www.ifac.org/globalsurvey.
AICPA Staff Contact
- Dan Noll, Director, Accounting Standards, dnoll@aicpa.org, 212/596-6168
- Fred Gill, Senior Technical Manager, Accounting Standards, fgill@aicpa.org, 212/596-6012
