FASB And IASB Sign Agreement On Accounting Standards Convergence

by Robin Pilgrim, LawAndTax-News.com, London

02 March 2006

The US Financial Accounting Standards Board (FASB) and the London-based International Accounting Standards Board (IASB) on Monday published a Memorandum of Understanding (MOU) that reaffirms the boards’ shared objective of developing high quality, common accounting standards for use in the world’s capital markets.

The MOU is a further elaboration of the objectives and principles first described in the boards’ Norwalk Agreement, which was published in October 2002.

According to the FASB:

"While the document does not represent a change in the boards’ convergence work programme, it does, however, reflect the context of the ‘roadmap’ for the removal of the reconciliation requirement for non-US companies that use IFRSs and are registered in the United States. It also reflects the work undertaken by the Committee of European Securities Regulators (CESR) to identify areas for improvement of accounting standards."

Sir David Tweedie, Chairman of the IASB, announced that:

"The memorandum of understanding marks another significant step in our partnership with the FASB to reach a truly global set of accounting standards. The pragmatic approach described in the MOU enables us to provide much-needed stability for companies using IFRSs in the near term, while taking advantage of a once-in-a-lifetime opportunity to contribute to removing the need for reconciliation requirements."

"At the same time, the IASB will continue its work on other areas not in the MOU and on topics that arise concerning the implementation and interpretation of IFRSs."

The roadmap also addresses auditing and enforcement, topics that are not accounting standard-setting issues and will require the co-operation of regulators and auditors.

The FASB and the IASB will meet on 27 and 28 April in London, when they will discuss topics described in the MOU.

Commenting on the signing of the Memorandum of Understanding, the European Union's Internal Market Commissioner, Charlie McCreevy stated that:

"I welcome this joint work programme, which balances amendments to current standards with longer-term considerations, while rightly focusing on areas where there is a clear business case for improved accounting standards. It is crucial that business in the EU is afforded a period of stability to get used to the new standards which have been applicable since 1 January 2005."

"I am pleased that the work programme also underlines the need for consistent interpretation and timely guidance on application of standards. Now we need to make sure that the work programme is reviewed regularly and that companies, auditors and market participants are given every opportunity to contribute to this process."

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