Joint Update Note from the IASB and FASB on Accounting Convergence
1. In 2006 the IASB and the FASB (the boards) agreed on a Memorandum of Understanding (MoU) that identified the short-term and longer-term convergence projects that would bring the most significant improvements to IFRSs and US GAAP. The MoU was updated in 2008.
2. The boards are close to completing the MoU programme: Most of the short-term projects identified for action have been completed or are close to completion and one has been determined to be a lower priority. Of the longer-term projects, several have been completed and there are three of the originally identified projects for which the boards have yet to finalise the technical decisions-leases, revenue recognition and financial instruments.
3. In our previous report we indicated that neither board would issue a new standard until it had first considered whether re-exposure was necessary; secondly, that it had considered the feedback on the proposed final standard; and thirdly, that it was satisfied that the standards were operational. In mid-2011, the boards jointly announced that they had decided to re-expose both the revenue recognition and leases proposals. This decision was made in response to feedback from a broad range of global constituents who raised concerns about the significant impact these standards would have on financial reporting. While formal decisions have not been made by the boards on classification and measurement and impairment of financial instruments, taking into consideration the significance of the changes that these projects propose, we expect that they will also be re-exposed.
4. The IASB and the FASB are continuing to work expeditiously on reaching converged solutions on our financial instruments, leases, and insurance projects. However, that work is being undertaken at a pace that enables thorough consultation to be undertaken with a particular focus on ensuring that potential solutions are operational. We expect that we will begin redeliberations of our joint project on revenue in the second quarter of 2012 and that we will re-expose our projects on classification and measurement, impairment, leases and insurance in the second half of 2012. We expect to issue final standards on these projects by mid- 2013.
5. Delays in completing these much-needed improvements to financial reporting are unfortunate, but necessary to ensure that any changes are operational and will bring about an improvement to financial reporting in these important areas. It is incumbent on the boards to ensure that changes made to our accounting requirements are appropriate, that our stakeholders have had the opportunity to fully participate in the process, and that the boards have been responsive in considering stakeholder feedback in the process. Re-exposure, in this case, is part of that process. Continue reading