24 October 2011

FASB chair Leslie F Seidman's remarks to NASBA

Regarding the convergence of US GAAP with IFRS, Leslie F Seidman said that “they have already made a significant amount of progress". For example, they have largely converged standards on business combinations, stock compensation, and non-monetary exchanges, which together eliminated some of the most significant differences that had been reported by foreign private issuers. Sometimes the FASB made changes to move the US towards IFRS, such as in the case of business combinations. Sometimes the IASB made changes to move IFRS more towards US GAAP, such as in the case of borrowing costs and segment reporting. The FASB recently issued converged standards on the definition of Fair Value Measurement and the presentation of Comprehensive Income, which will bring greater consistency to reporting around the world.

The remaining priority issues to be resolved under the Memorandum of Understanding with the IASB are Revenue Recognition, Leasing, and Financial Instruments. These topics reflect very prevalent transactions that most companies have, at least to some degree. The goal for all of these projects is to improve both IFRS and US GAAP, rather than using either standard as the starting point. That is why these projects are so challenging – they will apply to almost every company around the world, and investors care about them.

In addition Leslie F Seidman spoke about her views on the incorporation process for IFRS laid out by the SEC. She believes that the FASB has long supported the goal of developing high-quality, comparable, global accounting standards. The FASB is committed to pursuing a deliberate process of collaboration with the IASB and other international standard-setting organisations to achieve that goal.

There is ample evidence of this commitment, beginning with the FASB’s first plan for international activities, which was issued in 1991, and continuing through the current efforts to converge key US accounting standards with those of the IASB. Her frequent-flier status from crossing the Atlantic several times a year for joint meetings is further support of their ongoing commitment.

That said, as standard-setters work to achieve more comparable global accounting standards, she believes it is important to recognise three key points:

• The United States has put in place over the past 80 years a set of high-quality accounting standards in the form of Generally Accepted Accounting Principles (US GAAP). This has been achieved through the efforts of the SEC (since the enactment of the 1933 Securities Act), the state boards of accountancy, a rigorous auditing profession, and the independent standard-setting activities of the FASB and the organisations that preceded it.
• US investors, preparers, auditors, users of financial statements, and other stakeholders want to have a strong, clear and effective voice in the standard-setting process.  
• Any move towards international standards must maintain or improve upon the high quality of US accounting standards.

The staff of the SEC in May circulated a staff paper outlining one framework - “condorsement” - under which the United States could move toward adoption of IFRS, as promulgated by the IASB. Leslie F Seidman thinks the “condorsement” process outlined by the SEC staff has many positive aspects.

In conclusion, she commented on the issue of standard-setting for private companies. She believes the proposed Private Company plan, which creates a new Private Company Council whose role will be to "identify, propose, deliberate, and formally vote on specific exceptions or modifications to US GAAP for private companies", will complement the FASB efforts in addressing private companies' issues.

Full paper

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