FASB to Consider Project on International Convergence
On September 18, 2002, the Financial Accounting Standards Board (FASB) met with the International Accounting Standards Board (IASB). There were reports that the meeting ended in a definite commitment to future action. But the truth seems to be that no decisions were reached, except that FASB will consider a project on international convergence.
A tentative approach might be a 3-part project to address differences between U.S. and international standards arising from: (1) proposals in the IASB improvements project, (2) recently-issued FASB standards, and (3) a comparison of previously-issued FASB and IASB standards.
This approach was discussed at the meeting. Afterward, the Washington Post reported that both boards agreed to try to have a set of uniform standards worked out by 2005. The Post also quoted IASB Chairman Sir David Tweedie as saying, "What has happened today has been pretty historic. The capital markets will breathe a great sigh of relief."
Rather than breathing a sigh of relief, the already drooping U.S. markets tumbled still further on more bad news about previously reported earnings. Recent incidents have involved the Tyco looting accusations, falsification of 80% of a company's revenues, and admissions of accounting mischief prior to the collapse of now-bankrupt Kmart. As fate would have it, the auditor for all three companies was PricewaterhouseCoopers, where FASB Chairman Robert H. Herz was senior technical partner for PwC-Americas.
Skeptical observers point to problems that need fixing in the U.S., ("You Have To Wonder Where Tyco's Auditor Was," Wall Street Journal, September 18, 2002), and it's not intuitively clear how international convergence will solve these problems.