FASB and IASB Set Goals for Convergence
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The ‘roadmap’ referred to in the MOU is an agreement reached between the Securities and Exchange Commission and the European Union Internal Market Commission last April that the SEC would accept International Accounting Financial Reporting Standards (IFRS) developed by the IASB as comparable to US Generally Accepted Accounting Principles (GAAP) by 2009.
IFRS became mandatory for European companies as of January 2005 and 8,000 firms are now preparing their first set of financial reports using those standards, Reuters says. The SEC has been under pressure from Charlie McGreevey, EU Internal Market Commissioner, to eliminate the reconciliation requirement sooner than 2009, but US regulators say that the EU must first prove that is can apply and enforce the new standards, Reuters reports.
The MOU establishes guidelines for the two boards’ work on convergence, noting that it is a better use of the standards setting boards’ time to establish new standards where both the old FASB and IASB standards are in need of improvement. With an overall goal of achieving “measurable progress” by 2008, the joint press release says, the boards will determine where major differences can be eliminated through short-term standard setting projects, and both FASB and IASB will make continued progress in areas already identified as in need of improvement.
The FASB and IASB do not commit to completing the short-term projects listed in their memo because of the need for “research, deliberation, consultation and due process” but will consider measurable progress as fulfilling their contribution to the roadmap, the MOU says. In addition, IASB notes its responsibility to provide “stability of its standards for users and preparers in the near term.”
Sir David Tweedie, Chairman of the IASB commented in the join press release, “The pragmatic approach described in the MOU enables us to provide much-needed stability for companies using IFRSs in the near term, while taking advantage of a once-in-a-lifetime opportunity to contribute to removing the need for reconciliation requirements.” Robert Herz, Chairman of FASB said that the MOU “underscores our strong commitment to continue to work together with the IASB to bring about a common set of accounting standards . . . enabling the world’s capital markets to operate more efficiently.”