FAF to Offer Up to $3 Million Toward Joint FASB/IASB Projects
The parent organization of the Financial Accounting Standards Board (FASB) could contribute as much as $3 million this year to the International Financial Reporting Standards (IFRS) Foundation in support of several convergence projects that the FASB and the International Accounting Standards Board (IASB) are working to complete.
The FASB and the IASB – the standard-setting body of the IFRS Foundation – have been trying to finalize converged global accounting standards for revenue recognition, leases, financial instruments (both classification & measurement and impairment), and insurance contracts.
On January 28, the Financial Accounting Foundation (FAF) said it will make a nonrecurring contribution to the IFRS Foundation – up to three payments of $1 million during 2014 – that is intended to support the IASB during the period it is completing work on the four joint accounting standards projects with the FASB.
The FAF board of trustees made the decision after consulting with senior officials of the US Securities and Exchange Commission (SEC).
“Completing these joint projects clearly is in the best interests of FASB stakeholders, including all of those around the world who invest in US capital markets,” FAF Chairman Jeffrey Diermeier said in a written statement.
The contribution to the IFRS Foundation will come from the FAF’s reserve fund, officials said.
In a written statement on Tuesday, Barry Melancon, CPA, CGMA, president and CEO of the American Institute of CPAs (AICPA), said the contribution “is an important step in further advancing the convergence work of the IASB and FASB.”
“We commend FAF for doing so,” he continued. “We hope it serves as a catalyst for a broader discussion by all parties in the financial reporting process on how IFRS should evolve in the United States.”
FAF trustees made one previous contribution of $500,000 to the IFRS Foundation in 2011. In addition to the financial contribution, the FASB has dedicated its technical staff’s time to the convergence projects since the US standard-setting organization and the IASB jointly signed the Norwalk Agreement in 2002.
Under the agreement, the FASB and the IASB have worked together under a series of bilateral agreements to more closely converge US Generally Accepted Accounting Principles (GAAP) and IFRS, FASB Chairman Russell Golden said during the National Association of State Boards of Accountancy (NASBA) Conference in Maui, Hawaii, last October.
Of the four convergence projects, revenue recognition appears to be the closest to completion. The FASB and the IASB are working on a global accounting standard that would improve comparability and reduce complexity in how revenue is recognized in financial statements.
On November 6, 2013, the FASB voted to move forward with preparing the final standard, which is slated to be issued during the first quarter of this year. According to the FASB, the improved revenue recognition guidance will:
- Provide a more robust framework for addressing revenue issues as they arise.
- Increase comparability across industries and capital markets.
- Require better disclosure so investors and other users of financial statements better understand the economics behind the numbers.
During his speech at the NASBA Conference, Golden said the convergence project with the IASB has been a “major achievement” and developing and preserving more comparable and converged global accounting standards will “remain a critically important goal.”
“However, with the impending end of the era of bilateral convergence, it is important that we ensure that GAAP standards remain relevant to investors and creditors in US capital markets,” he added.
In addition to the final revenue recognition standard, Golden noted the FASB and the IASB “plan to issue final standards on our two financial instruments projects – classification & measurement and impairment – in 2014. A final standard on leasing should be completed in late 2014, and we will complete decisions on insurance thereafter.”
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