IASB pledges to maintain ‘strong’ bilateral relationship with FASB
IASB vice-chairman Ian Mackintosh heralds achievements of convergence project at AICPA conference
GLOBAL accounting standard setter the IASB has pledged to maintain its bilateral relationship with FASB, its US counterpart, despite attempts to converge US and international accounting standards having largely failed.
Speaking at an AICPA conference on current SEC and PCAOB developments held in Washington DC, Ian Mackintosh, vice-chairman of the IASB, said the bilateral relationship between the FASB and IASB “needs to remain strong” and that the similarities between IFRS and US GAAP are bigger than the differences.
“We have a joint responsibility to protect the body of convergence that has been reached and to minimise the differences in the future,” Mackintosh said. “Convergence was not a perfect process but it was a good one and we achieved a great deal.”
Efforts between the IASB and US counterpart FASB to develop a common financial instruments accounting standard failed after the two boards were unable to come to an agreed solution on how to account for the impairment of financial instruments. FASB’s standard is likely to recognise losses up-front instead of IASB’s so-called three-bucket approach.
The two boards have so far failed to agree a common lease accounting standard. In August, the IASB reversed its position on lease accounting after it “tentatively” decided to adopt a single model for lease expenses, scrapping the dual approach agreed with US counterpart FASB last year.
Nevertheless, Mackintosh said the two boards are “100% converged on the fundamental issue” that leases are present obligations that need to be recognised as leases on the balance sheet. He also stressed the relevance of IFRS to US investors despite the US Securities and Exchange Commission (SEC) having kicked any decision on adopting IFRS into the long grass back in 2012.
US investors currently hold more than $7trn (£4.5trn) in debt and equity securities of companies from IFRS jurisdictions, while more than half of the Fortune 500 are reporting in IFRS, Mackintosh said.
“That means an increasing number of American companies will be compared with their peers that use IFRS. IFRS also makes it easier for American companies to understand the reporting of their competitors, business partners and potential acquisition targets,” he said.
The prospect of America adopting IFRS received a boost last month after the SEC’s new chief accountant indicated he would make a recommendation about IFRS adoption within the next few months.