Accounting standard-setters and regulators in the U.S. and Europe jointly announced an agreement to stamp out differences in accounting standards. The pact was reportedly made in Norwalk, Connecticut last month by the Financial Accounting Standards Board (FASB) and the International Accounting Standards Board (IASB). Under this "Norwalk agreement," FASB and IASB jointly agree "as a matter of high priority" to remove any differences between their standards that remain at January 1, 2005.
Reactions among users of financials statements are lukewarm at best. Some accountants may view this approach as a troublesome departure from the normal process for setting U.S. accounting standards, while investors may see it as an untimely distraction from the more urgent resolution of today's crisis of confidence in the capital markets. Asked whether international convergence is an appropriate use of FASB's time, the board's advisory council reacted with a "Yes, but. . ." Examples of comments:
- "We should see that convergence focuses on issues that are really important to global investors. . . The capital markets have worked fine with IAS standards even though they are not comparable to U.S. GAAP. . . Is it possible that this is principally a regulatory problem?"
- "Until the IASB proves its ability to deliver high-quality standards, it is important for the FASB to be strong. This requires a full review and revision of the FASB's processes and governance mechanisms."
- "Given current events and the general rethinking of the way we manage financial reporting, I think the Board should focus on redesigning itself and its approach to better serve the public interest."
FASB is scheduled to discuss the other priorities suggested by the council in December. Meanwhile, the markets faltered as consumer confidence in the U.S. dropped to its lowest level since 1993, and the New York Times published a "slice of Americana" in a letter from a lady in Swarthmore, PA. She said, "The administration wants me to have confidence in the stock market, and then it approves to a new board overseeing the accounting profession the appointment of a nice man with no pertinent experience (William H. Webster) while overlooking the guy (John H. Biggs) whose best reference is the fact that the accounting lobby doesn't want him! My money is safely back in the mattress."