Updated IASB-FASB convergence agreement

  • iasbfasb.gif Image

27 Feb 2006

The US Financial Accounting Standards Board (FASB) and the International Accounting Standards Board (IASB) have published a Memorandum of Understanding (MOU) that reaffirms the boards' shared objective of developing high quality, common accounting standards for use in the world's capital markets.

The MOU is a further elaboration of the objectives and principles first described in an MOU published in October 2002. While the new document does not represent a change in the boards' convergence work programme, it does reflect the context of the US SEC's 'roadmap' for the removal of the reconciliation requirement for non-US companies that use IFRSs and are registered in the United States. It also reflects the work undertaken by the Committee of European Securities Regulators (CESR) to identify areas for improvement of accounting standards.

Both the FASB and the IASB note that removing the current reconciliation requirements will require continued progress on the boards' convergence programme. Accordingly, the MOU sets out milestones that the FASB and the IASB believe are achievable...

The boards agreed that trying to eliminate differences between standards that are both in need of significant improvement is not the best use of resources. Instead, new common standards should be developed. Consistent with that principle, convergence work will continue to proceed on the following two tracks:

  • First, the boards will reach a conclusion about whether major differences in focused areas should be eliminated through one or more short-term standard-setting projects, and, if so, the goal is to complete or substantially complete work in those areas by 2008.
  • Second, the FASB and the IASB will seek to make continued progress in other areas identified by both boards where accounting practices under US GAAP and IFRSs are regarded as candidates for improvement.

 

The goal by 2008 is to reach a conclusion about whether major differences in the following few focused areas should be eliminated through one or more short-term standard-setting projects and, if so, to complete or substantially complete work in those areas.

Topics for short-term convergence include:

To be examined by the FASB

To be examined by the IASB

Fair value option*

Borrowing costs

Impairment (jointly with the IASB)

Impairment (jointly with the FASB)

Income tax (jointly with the IASB)

Income tax (jointly with the FASB)

Investment properties**

Government grants

Research and development

Joint ventures

Subsequent events

Segment reporting

FASB Note: *Already on FASB's active agenda ** To be considered by the FASB as part of the fair value option project

IASB Note: Topics are part of the IASB's existing short-term convergence project except for impairment, which will be added to that project

The two boards will meet on 27 and 28 April 2006 in London, when they will discuss topics described in the MOU. Click for:

 

Correction list for hyphenation

These words serve as exceptions. Once entered, they are only hyphenated at the specified hyphenation points. Each word should be on a separate line.