The International Accounting Standards Board (IASB) and the
US Financial Accounting Standards Board (FASB) have reworked their
convergence plan to allow for greater public consultation, while
ensuring the most urgent projects are completed by June 2011.
The two boards signed a memorandum of
understanding that committed to substantially converging IFRS and
US GAAP in 2006.
But the project did not attract widespread
public attention until the financial crisis, when banks from both
the US and Europe claimed differences between the standards caused
a competitive disadvantage.
The G20 responded in September 2009 by calling
on the IASB and FASB to redouble their efforts to complete
convergence by June 2011.
The deadline is particularly important because
a number of major economies plan to adopt IFRS in 2011 and 2012,
and it would be ideal for them to have a stable base of standards
to start on. It is also significant because the world’s two largest
economies, the US and Japan, are considering the improvement and
convergence of the standards as important factors when deciding
whether to adopt IFRS.
In recent months financial reporting
stakeholders have become increasingly concerned they would not have
enough time to comment on the unprecedented number of exposure
drafts the IASB and FASB would need to release during the next year
to meet the June 2011 deadline.
The boards have responded by modifying their
work plan so no more than four significant exposure drafts are
issued in any quarter.
In a letter to global leaders ahead of the G20
meeting in Canada this month, the boards said they have retained
targeted completion dates of June 2011 or earlier for the most
urgent projects (see box). The convergence projects whose
completion dates have been pushed to the end of 2011 or beyond
include financial statement presentation and financial instruments
with characteristics of equity.
One notable feature of the progress report
provided to the G20 is the absence of a commitment to achieve a
converged financial instruments standard. The two boards are
currently considering very different financial instruments
proposals and if they cannot reach the same conclusion, they may
have to develop reconciliation requirements.
US Securities and Exchange Commission (SEC)
chair Mary Schapiro said the delay will not affect the SEC’s plans
to decide in 2011 whether the US will adopt IFRS.
Speaking after the IASB and FASB’s
announcement, Schapiro said additional time for stakeholders to
provide quality feedback is “time well invested”.