IASB, FASB Set 2011 Completion Date for Joint Convergence Projects
The U.S. Financial Accounting Standards Board (FASB) and the International Accounting Standards Board (IASB) intend to complete all major joint projects in the push for a single set of global accounting standards by 2011, according to an updated Memorandum of Understanding (MoU) issued in September.
The boards also reported that they had made progress in seven of the 11 priority areas of convergence originally identified in 2006.
“The FASB and the IASB have set a goal of completing a number of major projects over the next few years. I believe that delivering on that goal will bring significant improvement to both U.S. GAAP and IFRS in the areas that are important to investors,” said FASB Chairman Robert Herz. “We will also decide by the end of next year whether to modify the short-term convergence program to enable a sharpened focus on the major improvement efforts.”
The original MoU established the priorities within the FASB-IASB joint work program in the form of specific milestones to be reached by 2008. That MoU was based on three principles:
- Convergence of accounting standards can best be achieved through the development of high quality, common standards over time.
- Trying to eliminate differences between two standards that are in need of significant improvement is not the best use of the FASB’s and the IASB’s resources—instead, a new common standard should be developed that improves the financial information reported to investors.
- Serving the needs of investors means that the Boards should seek convergence by replacing standards in need of improvement with jointly developed new standards.
Projects where the Boards are currently working jointly to improve or create new standards for IFRS and U.S. GAAP include business combinations, financial instruments, financial statement presentations, intangible assets, leases, liabilities and equity distinctions, and revenue recognition.
Areas identified for improvements where the Boards are at different stages in standard development and for which they will seek a common standard include consolidation, derecognition, fair value measurement, and post-employment benefits including pensions.
Among the projects completed include issuance of standards on a number of short-term convergence projects. Bringing U.S. GAAP into line with IFRS, the FASB issued new or amended standards that introduced a fair value option (SFAS 159) and adopted the IFRS approach to accounting for research and development assets acquired in a business combination (SFAS 141R). Converging IFRS with U.S. GAAP, the IASB published new standards on borrowing costs (IAS 23 revised) and segment reporting (IFRS 8).
Other short-term progress includes the publication by IASB of an Exposure Draft on joint ventures in September 2007, comments on which are currently being considered. A final standard is expected to be released in early 2009. The IASB also plans to publish a proposed standard on income taxes that would improve IAS 12, Income Taxes, and eliminate certain differences between IFRS and U.S. GAAP.
In the second half of 2008, FASB plans to publish proposed standards on accounting and reporting for subsequent events. It will also review its strategy for short-term convergence projects in light of the possibility that some or all U.S. public companies might be permitted or required to adopt IFRS at some future date.
As part of that review, the FASB will solicit input from U.S. constituents by issuing an Invitation to Comment containing the IASB’s proposed replacement of IAS 12. It will then decide whether to undertake projects that would eliminate differences in the accounting for taxes, investment properties, and research and development by adopting the relevant IFRS standards (IAS 12, as revised, IAS 40, and IAS 38).
“Whilst the MoU forms an essential part of our strategy, we remain committed to addressing other important projects on our agenda such as insurance accounting and those standards affected by the credit crisis,” noted IASB Chairman Sir David Tweedie.
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