The global financial reporting project is alive and well, according to Russell Golden, Chairman of the Financial Accounting Standards Board (FASB). Despite rumors that the FASB and the International Accounting Standards Board (IASB) are at odds, Russell sets the record straight: The boards are expected to continue progress toward improved, aligned financial reporting solutions.
“We are in constant contact with IASB members and staff about projects on their research agenda,” Golden said at the 18th Annual Financial Reporting Conference in May. “And we each share our research activities to see if we can continue progress toward improved, aligned solutions.” His comments indicate that part of the FASB’s standard setting process is aligning U.S. Generally Accepted Accounting Principles (GAAP) with International Financial Reporting Standards (IFRS).
The FASB’s primary objective is to develop and improve GAAP for those who use it, both within and outside of the United States. But Golden also wants the FASB to forge ahead with its work with the IASB, its strongest ally in the financial reporting space. He envisions bringing GAAP and IFRS closer in key areas than they were over the past decade.
Golden’s comments shadow a long-held debate within accounting circles about whether GAAP and IFRS should be converged into one global standard. But the FASB and the Securities and Exchange Commission (SEC) have been hesitant to relinquish control over accounting rules and adopt a more principles-based regime under IFRS. This debate was spurred, in part, when the FASB and IASB signed a joint Memorandum of Understanding about a decade ago to align a batch of major accounting rules.
One convergence success story is the standards on revenue from contracts with customers, Accounting Standards Update (ASU) No. 2014-09 and IFRS 15. The FASB and IASB issued these standards in 2014, and they went into effect for publicly traded companies in 2017 and private ones in 2018.
The joint project on accounting for leases was less successful, although it narrowed the differences between reporting leases under GAAP and IFRS. After a decade of debate, the standard-setting bodies published divergent lease reporting standards — ASU 2016-02 and IFRS 16 — in 2016.
In the early 2000s, the boards jointly redeliberated accounting standard-setting topics. But joint redeliberations stopped after it became apparent that the United States had no intention of ditching GAAP for IFRS. The FASB’s constituents said such a move would leave U.S. companies at a disadvantage because of the knock-on implications, such as education, textbooks and systems changes.
Renewed push toward comparability
Talk of global convergence has died down after publication of the standards on leases. But far from going their separate ways, both the FASB and the IASB have been working together on several fronts.
For example, during the FASB’s agenda consultation project a few years ago, the FASB sought public comments on potential new technical projects. In particular, the FASB asked U.S. companies to comment on the IASB’s solutions on pensions and intangible assets — and whether they thought those solutions might work in the United States.
“We continue to learn from each other,” Golden said. “Later this year, the FASB and the IASB will have another joint meeting in London to discuss common projects,” he said. Golden added that, over the past five years, the FASB has also helped improve IFRS through its membership in the Accounting Standards Advisory Forum (ASAF).
The ASAF was created by the IFRS Foundation in 2014. Its purpose is to advise the IASB as it develops accounting standards. The FASB serves on the ASAF with representatives of other national standard-setting boards.
The FASB’s participation on the ASAF is an important opportunity to represent U.S. interests in the IASB’s standard-setting process. “It has proved to be yet another valuable opportunity to work together with other standard setters on issues of common interest,” said Golden. “And it helps all of us continue the process of improving GAAP, IFRS and other national standards.”
In addition to ASAF meetings, the FASB also meets individually with standard setters from Canada, Japan, Italy, China, Korea, Australia, France, the United Kingdom and other nations to exchange ideas on improving their respective standards. “This process also helped promote the broader flow of information and ideas that mutually inform our thinking,” said Golden, “and to contribute to an environment that will foster greater alignment of standards across the globe.”
In 2020, the FASB will host a meeting of the International Forum of Accounting Standard Setters (IFASS) in Washington, D.C. This is a group of national accounting standard setters from around the world, plus other organizations closely involved in financial reporting issues. Golden believes these meetings will help foster relationships that are critical to developing better and more comparable standards throughout the world. Rather than focusing on convergence, FASB and IASB members are setting their sights on collaboration and comparability.
Contact your MCM professional for more information.
© Copyright 2019 Mountjoy Chilton Medley LLP All Rights Reserved
An Independent Member of PrimeGlobal
Personnel Profiling joins MCM
Effective July 1, 2014, Personnel Profiling, Inc. has joined the team at Mountjoy Chilton Medley, Kentucky’s largest CPA & advisory firm. With MCM, we’ll continue to offer the same top notch HR assessments, services and tools, now coupled with a greater breadth of in-demand expertise and services. You can now find the PPI main office and staff at MCM’s downtown Louisville headquarters.Read About The Merger Continue to MCM's Website