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Thoughts of FASB chairman on international convergence

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30 Oct 2003

FASB Board members also responded to the 2003 annual FASAC survey (see news story below).

Following are the comments of FASB Chairman Rohert H. Herz on international convergence:

International Convergence. This needs to be a continuing and constant priority, both in terms of eliminating specific 'narrow' differences between U.S. GAAP and IFRS through 'short-term' convergence projects and by aligning our future agendas on major projects as best we can. I believe that we can do this in a way that is consistent with the recommendation in the SEC report on principles based standards that over time we redo some of the more 'rulesbased' standards in current U.S. GAAP. In that regard, the SEC report cites stock compensation, leasing, derivatives, and derecognition of financial assets as examples of such rules-based standards. With regard to stock compensation, both we and the IASB are, of course, currently working on that subject. Leasing (or perhaps the broader subject of executory contracts) is a topic I would favor us taking on as a joint project in the next year or so. I would also favor us revisiting Statements 133 and 140 and all the related pronouncements. However, a more principles-based or objectives-oriented approach in these areas would, in my view, imply moving to a full fair value model for financial instruments. While I personally favor such a move, its timing requires that we address and satisfactorily resolve important measurement and display issues and reliability concerns. Because this is a pervasive and controversial area, I think it would be important that we address it jointly with the IASB. But right now I do not believe that the IASB would be prepared to put this on its current agenda because of all the other things it needs to get done in the near term to achieve a 'stable platform' for 2005, including getting its existing financial instruments standards (IAS 32/39) improved and adopted by the European Commission.

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