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FASB confirms that improvement of GAAP is its topmost priority

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25 Jun 2014

In the first speech of a FASB member after the IASB Vice-Chairman's speech warning against 'turning back the clock', the FASB has confirmed that while it will continue to work with the IASB to make accounting standards as comparable as possible its topmost priority is 'to improve and protect the quality of GAAP'.

In a speech given at the IFRS Conference in London earlier this week, IASB Vice-Chairman Ian Mackintosh had warned against 'turning back the clock' and had directly commented on remarks made recently by members of the FASB that one size (of accounting standards) may not fit all. He had stated: "If all IASB constituents were to insist on the primacy of national preferences, obviously the goal of a single set of global standards would come to naught".

At an accounting conference in California yesterday, FASB member Tom Linsmeier responded by stressing again that the FASB is committed to completing the remaining joint projects with the IASB but afterwards foresees a future of co-existence instead of convergence at all cost:

Once those projects are complete, we envision a new, long-term, decentralized, global standard-setting environment in which the FASB, the IASB, and other major capital market standard setters co-exist and cooperate, as peers, with the goal of issuing more comparable standards, while also addressing the specific needs of the capital markets for which they set standards.

Given that he was speaking at a conference of the American Gas Association, Mr Linsmeier turned to rate-regulation to illustrate his point. He explained that the principles that guide accounting for rate-regulated utilities under US GAAP were well established, understood and supported in the United States. He noted that under IFRSs, there currently was an interim standard on rate regulation (IFRS 14 was issued earlier this year) but the IASB was still working on a final standard where the project was still in research phase.

Illustrating his point about the post-convergence priorities of the FASB, he noted that despite the urging by some in the international community to develop a new, converged standard with the IASB, he did not "foresee the FASB making major changes to [its] model." Mr. Linsmeier stated that while the FASB model was not perfect, "it is not broken" and that it was "very hard to conclude that it would be cost-beneficial to ask our stakeholders to completely overhaul their accounting for rate-regulated activities just to achieve convergence with IFRS."

The full transcript of his speech is available on the FASB’s Web site.

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