Download Global Accounting Standards Report

The Case for Global
Accounting Standards
NASBA Annual Meeting
October 28, 2008
Leslie F. Seidman, FASB Board Member
1
Disclaimer
The views expressed in this presentation are my own
and do not represent positions of the Financial
Accounting Standards Board.
Positions of the FASB are arrived at only after extensive
due process and deliberations.
2
International Convergence: Why?





A single set of high-quality
accounting standards is key to a
global reporting system
The rest of the world has spoken
(not U.S. GAAP)
Facilitates world-wide investment
Reduces the cost of capital
Reduces operational costs
3
International Convergence:
Major Milestones



April 2001
September 2002
January 2005

February 2006
December 2007

August 2007

May 2008
Fall 2008
September 2008
2011




IASB Formed (replaced IASC)
Norwalk Agreement
European Union/other countries adopt
IFRS
FASB/IASB MOU
SEC eliminates reconciliation for foreign
filers
SEC Concepts Release re: voluntary IFRS
adoption
AICPA amends rule 203 to recognize IFRS
Potential SEC release on IFRS adoption
FASB/IASB update to MOU
Other major economies (Japan, China,
Korea, Canada) plan to adopt IFRS
4
Which Standards:
IFRS or U.S. GAAP?
Countries adopting IFRS or a variant
Countries converging toward IFRS
5
Common IFRS vs. U.S. GAAP Differences








Optional balance sheet recognition for pension
assets/liabilities
Capitalization of research and development costs
LIFO prohibited
No guidance on uncertain tax positions; other tax
differences
Option to value property at FV
No leveraged lease accounting exception
Standards on securitizations are based on different
principles
No netting under master netting agreements
6
Progress to Date






Share-based Payments
Business Combinations
Non-controlling Interests
Segment Reporting
Fair Value Option
Other narrow changes
7
September Update of MOU
Joint Projects:
 Conceptual Framework
 Revenue Recognition*
 Financial Statement
Presentation*
 Lease Accounting*
 Liabilities and Equity*
 Consolidations**
 De-recognition**
“Short term” projects
 Income Taxes***
 Earnings per Share
* Target completion dates of 2011
** Initially, separate efforts but hope to converge down the road
*** FASB will likely issue an ITC of proposed revision of IAS 12
8
Other Related Projects
FASB-Only Projects:
IASB-Only Projects:
 FAS 140/FIN 46(R)

 FAS 133, Hedging

 FAS 5, Contingency
Disclosures



Fair Value
Measurements
Postretirement
Benefits
SME Project
Nonfinancial Liabilities
Joint Ventures
9
Not Just an Accounting Issue

Single independent accounting standard setter and
interpretative body with adequate staffing and funding

No endorsement processes for accounting standards by
individual governments or countries

Cooperative international regulatory, enforcement,
corporate governance regimes focused on investors

High-quality auditing standards and auditor independence
requirements

Training, educating and accrediting of all capital market
participants
10
FASB Recommendations
Prepare a blueprint for moving U.S. to IFRS
 Get relevant parties together





FASB, IASB, SEC, PCAOB, audit firms, preparers, users,
academia, regulators, AICPA, NASBA, IRS, etc.
Identify financial reporting infrastructure that
needs to change
Set a date for completion, with milestones
Consider implications for small, private and
nonprofit organizations
FASB pursue “improve and adopt” approach


Work with IASB on areas that need improvements
FASB adopts IFRS in other areas “as is”
11
SEC Releases on Convergence


In 2007 the SEC eliminated the requirement for
Private Foreign Issuers to reconcile to U.S. GAAP
if entity uses IFRS
The SEC proposing release*:




Would permit use of IFRS for some U.S. registrants,
upon year ending 12/31/09
Establishes milestones to consider requiring use of
IFRS in U.S.; decision will be made by SEC in 2011
If milestones are met and they decide to require, earliest
date is 2014, with later dates for those with smaller
market caps
Proposal may suggest possible reconciliations to U.S.
GAAP, at least for a period of time
*Based on press release. Check www.sec.gov for more information.
12
What Happens to FASB?





Good question!
Multi-year strategy
Very path dependent (Mandate for public
companies? Gradual transition for all?)
Most countries maintain a national standard
setter for local needs
IASB might want “regional” offices for large
capital markets
13
Staying Current

Best ways to stay current
www.fasb.org, www.iasb.org
 Sign up for electronic Action Alert
 New FASB Web cast series
 Key tabs on left of home page

• Project Activities
• Exposure Documents
• Effective Dates
• Pronouncements and EITF Abstracts
14
Questions
?
15