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04 December 2012

FASB/Seidman: Current SEC and PCAOB developments


Leslie F Seidman, Chairman of the FASB, delivered her speech to AICPA on current SEC and PCAOB developments. Ms Seidman assesses the improving of financial reporting in the United States and implications for convergence of IFRS and US GAAP in the future.

The decision on whether and how to incorporate IFRS into US GAAP is a major public policy issue for the United States that rightly rests with the SEC. It is very important to note that the SEC staff review has been broader than the IFRS themselves. The Commission’s staff also has been reviewing the way that the standards are interpreted, applied and enforced in various jurisdictions. The SEC staff has been examining broader issues, such as the governance, due process, and funding of the IFRS Foundation as well.  

In Ms Seidman's view, all of these dimensions are important to achieving the goal of creating comparable financial information for investors. Having the same words in a standard can be a good start, but it is not necessarily going to produce consistent information if the standard is interpreted differently or enforced differently within a jurisdiction or across jurisdictions. The SEC staff report indicates that there is some level of diversity in the implementation of IFRS across jurisdictions.

The staff also found that some other countries adapt IFRS to deal with their individual cultural, business and economic issues. For example, China has a unique situation with government-controlled entities, so it has adapted the related parties standard to address that situation.

This apparent need for some adjustments does not mean that IFRS is flawed; it simply suggests that a goal of 100 per cent comparability (such as a single set) is not achievable in the near term, for very legitimate reasons, in some of the world’s largest capital markets. The SEC will make a decision on its own timeline, and the FASB commends the thoughtful, analytical approach it has employed thus far. In the meantime, the FASB believes that it should work with the IASB to complete the MOU projects, which address important, pervasive transactions.

Regarding new projects, the FASB would like to be actively involved in discussions with the IASB and other standard-setters to continue to improve US GAAP, IFRS and other global accounting standards, and to make those standards more comparable. A great example of this is the way the FASB has been working with the EFRAG on the Disclosure Framework project. The issue is global, and it makes a lot of sense to work cooperatively to address it.

In the early days, the FASB narrowed a significant number of differences between US GAAP and IFRS using a less formal approach to convergence, including leveraging each other’s work with periodic meetings. Ms Seidman thinks that approach could work again, and it could include other standard-setters from major capital markets. Simply put, even though the relationship is bound to change, that does not mean the FASB thinks convergence is over or that divergence will occur.

Full speech



© FASB


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