Despite being set back by differing project timetables, the International Accounting Standards Board (IASB) and the US Financial Accounting Standards Board (FASB) have agreed to intensify their efforts to achieve a single set of high quality standards within the context of their respective independent standard-setting processes.
In a joint statement, the two standards bodies say they have committed to complete each major project by the end of June 2011, taking into account the several major countries are adopting IFRSs in 2011 and that for some other countries, including the US, continued improvement and convergence is an important consideration in deciding the role of IFRSs in their capital markets.
To provide transparency and accountability regarding those milestones, the two organisations will be reporting quarterly their progress on the convergence projects and to making those reports available on their websites.
“Our efforts to improve IFRS and US GAAP for financial instruments and to achieve their convergence have been complicated by the differing project timetables we established to respond to our respective stakeholder groups and other factors,” state the organisations. “We are committed to issuing standards by the end of 2010 that represent a comprehensive and improved solution to this complex and contentious area and that provide international comparability.”
Reporting on the convergence strategy for Financial Instruments, the IASB’s project plan for the replacement of IAS 39 consists of three main phases—classification and measurement; impairment methodology; and hedge accounting.
Meanwhile, the FASB says it has been developing proposals to replace the equivalent requirements in US GAAP, which it plans to publish for public comment in the first quarter of 2010.
As for the consolidation project, the FASB says it has recently amended its requirements in relation to identifying when entities known as variable interest entities should be consolidated into the financial reports of the reporting group. Variable interest entities include the type of structure such as structured investment vehicles that attracted attention as the global credit crisis developed. For their part, the IASB is currently finalising its proposals to revise its requirements for identifying when entities should be consolidated. The IASB’s proposals would apply to entities that would be variable interest entities in US GAAP. However, the IASB’s proposals are also broader and would apply to those entities that are normally controlled by way of voting interests.
The boards are also developing convergence strategies for derecognition; fair value measurement; revenue recognition; leases, financial instruments with the characteristics of equity; and financial statement presentation.