US and Europe unite on standards convergence
Global and US standard-setters are working on an ambitious project to draft an international financial reporting standard that would carry precisely the same wording in the US and Europe.
Accountancy Age has learned that the International Accounting Standards Board and US standard setter the Financial Accounting Standards Board are hoping to have an exposure draft on business combinations in place by early next year. Although listed companies in Europe have to adopt IFRS on 1 January 2005, critics have questioned how global the new rules will be given that US companies will continue to use US GAAP.
The project marks the most significant attempt yet to deal with the shortcoming. Although the IASB and FASB have been working behind the scenes on convergence, creating an identically worded standard accepted by US, European markets and beyond would be a major breakthrough.
‘We have given the pen to one person,’ said IASB chairman Sir David Tweedie, who described working on convergence with the US as his ‘number one priority’. He added: ‘We expect to see by the end of the year whether it works.’
FASB chairman Bob Herz said that, while the two boards were working together on a number of major projects, ‘the main focus here is to converge European and US standards’. Herz said the challenge of finding an acceptable wording for the business combinations exposure draft was ‘getting the language right’.
And he added that this could be a model for future exposure drafts: ‘That’s the way we would like to operate on major projects going forward.’
The SEC threw its weight behind the transatlantic drive for convergence. ‘The agency supports ongoing convergence between the FASB and the IASB to enhance the quality of financial reporting worldwide,’ the SEC said in its strategic plan this week.