International Accounting Standards Board®
Press Release
FOR IMMEDIATE RELEASE
15 December 2003
INTERNATIONAL ACCOUNTING STANDARDS BOARD
WELCOMES US MOVE TO CONVERGE WITH IFRSs
The International Accounting Standards Board (IASB) welcomes the release of four Exposure
Drafts by the US national standard-setter, the Financial Accounting Standards Board (FASB).
The proposals are part of a joint effort to eliminate differences between US generally accepted
accounting principles (GAAP) and International Financial Reporting Standards (IFRSs). The
four FASB Exposure Drafts released today address the accounting for changes in accounting
policies, earnings per share, exchanges of non- monetary assets, and inventory measurement. A
fifth US Exposure Draft, on the classification of liabilities as current or non-current, is expected
in January 2004.
The FASB Exposure Drafts are part of a series of proposals likely to result from the short-term
convergence project that was initiated after the joint meeting of the IASB and the FASB in
September 2002. At that meeting, and in the subsequent Norwalk Agreement of October 2002
(attached), the FASB and the IASB “agree[d] to quickly commence deliberating differences
identified for resolution in the short-term project with the objective of achieving compatibility by
identifying common, high-quality solutions.” Through the convergence project, the two boards
are able to build on existing practice to improve their respective accounting standards, while
reducing differences that serve to confuse the investing public and increase barriers to the free
flow of capital.
The IASB has already published, in its Exposure Draft ED 4 Disposal of Non-current Assets and
Presentation of Discontinued Operations, proposals to bring international practice (now set out
in IAS 35 Discontinuing Operations) into line with US GAAP. The IASB and the FASB are
also working on proposals to reduce differences in the accounting for research and development,
income taxes, and interim reporting. Furthermore, the two boards are cooperating to reach
similar conclusions on issues related to business combinations, share-based payment and revenue
recognition.
30 Cannon Street, London, EC4M 6XH, United Kingdom
Telephone: +44 (0)20 7246-6410, Fax: +44 (0)20 7246-6411, email: iasb@iasb.org Web: www.iasb.org
In welcoming the FASB’s proposals, Sir David Tweedie, Chairman of the IASB, commented,
“Both the IASB and the FASB see the convergence project as an opportunity to build upon
existing best practice, contained in IFRSs and in US GAAP and other national standards. In
pursuing the convergence goal, the two boards will improve the quality of their existing
standards, while reducing differences that cause unnecessary confusion and barriers to
cross-border investment and economic growth. In the first year of the project, we have made
good progress towards our shared goal of achieving a single set of high quality global accounting
standards. The FASB’s proposals are a further step in that direction, and clearly demonstrate the
US board’s commitment to our shared objective.”
END
Press enquiries:
Kevin Stevenson, Director of Technical Activities, IASB,
telephone: +44 (0)20 7246 6460, email: kstevenson@iasb.org
Tom Seidenstein, Director of Operations, IASC Foundation
Telephone: +44 (0)20 7246 6450, email: tseidenstein@iasb.org
NOTES TO EDITORS
1.
The International Accounting Standards Board (IASB), based in London, began
operations in 2001. It is funded by contributions from the major accounting firms, private
financial institutions and industrial companies throughout the world, central and development
banks, and other international and professional organisations. The 14 Board members (12 of
whom are full-time) reside in nine countries and have a variety of functional backgrounds. The
Board is committed to developing, in the public interest, a single set of high quality, global
accounting standards that require transparent and comparable information in general purpose
financial statements. In pursuit of this objective, the Board cooperates with national accounting
standard-setters to achieve convergence in accounting standards around the world.
2.
The IASB and the US FASB reached an agreement to achieve work together on both
short-term and long-term convergence issues. The agreement was formalised in a Memorandum
of Understanding, now known as the Norwalk Agreement (copy attached).
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Appendix
Memorandum of Understanding
“The Norwalk Agreement”
At their joint meeting in Norwalk, Connecticut, USA on September 18, 2002, the
Financial Accounting Standards Board (FASB) and the International Accounting
Standards Board (IASB) each acknowledged their commitment to the development of
high-quality, compatible accounting standards that could be used for both domestic and
cross-border financial reporting. At that meeting, both the FASB and IASB pledged to
use their best efforts to (a) make their existing financial reporting standards fully
compatible as soon as is practicable and (b) to coordinate their future work programs to
ensure that once achieved, compatibility is maintained.
To achieve compatibility, the FASB and IASB (together, the “Boards”) agree, as a
matter of high priority, to:
a) undertake a short-term project aimed at removing a variety of individual
differences between U.S. GAAP and International Financial Reporting
Standards (IFRSs, which include International Accounting Standards, IASs);
b) remove other differences between IFRSs and U.S. GAAP that will remain at
January 1, 2005, through coordination of their future work programs; that is,
through the mutual undertaking of discrete, substantial projects which both
Boards would address concurrently;
c) continue progress on the joint projects that they are currently undertaking;
and,
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d) encourage their respective interpretative bodies to coordinate their activities.
The Boards agree to commit the necessary resources to complete such a major
undertaking.
The Boards agree to quickly commence deliberating differences identified for resolution
in the short-term project with the objective of achieving compatibility by identifying
common, high-quality solutions. Both Boards also agree to use their best efforts to
issue an exposure draft of proposed changes to U.S. GAAP or IFRSs that reflect
common solutions to some, and perhaps all, of the differences identified for inclusion in
the short-term project during 2003.
As part of the process, the IASB will actively consult with and seek the support of other
national standard setters and will present proposals to standard setters with an official
liaison relationship with the IASB, as soon as is practical.
The Boards note that the intended implementation of IASB’s IFRSs in several
jurisdictions on or before January 1, 2005 require that attention be paid to the timing of
the effective dates of new or amended reporting requirements. The Boards’ proposed
strategies will be implemented with that timing in mind.
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News Release
Financial Accounting Standards Board
401 Merritt 7, P.O. Box 5116 , Norwalk, CT 06856-5116 (203) 847-0700
Fax: (203) 849-9714
Media Contact :
Sheryl Thompson
(203) 847-0700, Ext. 268
For Immediate Release
FASB Issues Exposure Drafts to Improve Accounting Guidance and
Support Convergence of Global Accounting Standards
Norwalk, CT, December 15, 2003—Today t he Financial Accounting Standards
Board (FASB) will issue four Exposure Drafts that would improve U.S. generally
accepted accounting principles and converge U.S. accounting guidance to
existing international accounting standards. The documents will be available
later today on the FASB’s website at www.fasb.org.
The Exposure Drafts reflect the progress that the FASB and International
Accounting Standards Board (IASB) have made on a first phase of a joint shortterm convergence project that was initiated in 2002. The short -term convergence
project involves both the FASB and IASB comparing existing standards and
conforming the two sets of standards to the higher-quality solution.
The short-term convergence project is part of a comprehensive project to
converge their respective accounting standards into a common set of high-quality
accounting standards. In addition to this short-term project, the Boards are jointly
working on several projects on major accounting topics and are developing a
coordinated agenda for continuing the convergence effort.
The Exposure Drafts propose the following accounting requirements:
•
•
•
•
Voluntary changes in accounting policies would be required to be applied
by retrospective application rather than by cumulative effect adjustment as
currently required.
Three changes to the calculation of earnings per share;
Asset exchanges that would require a gain or loss to be recognized on
the exchange of similar productive assets based on the fair value of the
exchange unless the exchange lacks commercial substance; and
Unusual (“abnormal”) amounts of idle capacity and spoilage costs would
be excluded from the cost of inventory and expensed as incurred.
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An additional proposed standard on the classification of liabilities is expected in
the near future.
In commenting on the Exposure Drafts, FASB Chairman Robert H. Herz, stated
“The proposed changes demonstrate the progress made since an agreement
was reached in October 2002, when the FASB and the IASB committed to
adopting compatible and high-quality solutions to existing and future accounting
standards. These proposed statements are an important step toward increasing
comparability of U.S and international accounting standards.”
The comment period for the Exposure Drafts ends on April 13, 2004.
About the Financial Accounting Standards Board
Since 1973, the Financial Accounting Standards Board has been the designated
organization in the private sector for establishing standards of financial
accounting and reporting. Those standards govern the preparation of financial
reports and are officially recognized as authoritative by the Securities and
Exchange Commission and the American Institute of Certified Public
Accountants. Such standards are essential to the efficient functioning of the
economy because investors, creditors, auditors and others rely on credible,
transparent and comparable financial information. For more information about
the FASB, visit our website at www.fasb.org.
The Financial Accounting Standards Board
Serving the investing public through transparent information resulting
from high-quality financial reporting standards, developed in an
independent, private-sector, open due process.
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