Convergence with U.S. accounting standards is “still an important consideration” for the IASB although formalized talks have concluded, Chair Andreas Barckow told an industry conference in Washington, D.C.
Over the years, the IASB’s focus has shifted from jointly developing solutions to keeping international financial reporting standards (IFRS) converged with U.S. GAAP, he said on Dec. 12, 2022, at the 2022 AICPA & CIMA Conference on Current SEC and PCAOB Developments.
“We achieve that by bringing the two boards together for education and information-sharing sessions, by talking regularly to our colleagues at FASB at all levels, and by alerting each other of new information and developments arising,” he said in a speech. “I hope that you all agree with me in seeing the great benefit this brings to global capital markets.”
He cited accounting standards on business combinations, consolidations, fair value measurement, leases, revenue recognition and segment reporting, as a few important areas where the standards are globally converged, but pointed to financial instruments and insurance contracts as areas where they were not able to achieve full compatibility.
The issue of convergence is one that consistently is broached at accounting conferences, of interest to multinational companies that use both IFRS and U.S. GAAP. Further, the SEC allows foreign private issuers to report using IFRS accounting standards. The term, however, started being used between the IASB and the FASB in relation to the so-called ‘Norwalk Agreement’ that the boards struck in the early 2000s. At the heart of that agreement was a pledge by both boards, “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.”
The U.S. is today well represented at all levels of the IASB’s organization, said Barckow.
“And it is in everyone’s interest that the U.S. literature and international financial reporting standards remain closely aligned, especially in areas where our respective standards are substantially converged,” he said.
Among other topics, Barckow also touched on the board’s five-year priorities and recent decisions not to change the subsequent accounting for goodwill or add a project on cryptocurrencies.
He reiterated the board’s stance that there is little evidence that the accounting for cryptocurrencies is of global significance or prevalence for companies reporting under IFRS Accounting Standards “therefore, the topic was not added to our work plan for now.”
In 2018-19 the IFRS Interpretations Committee concluded that cryptocurrencies should either be accounted for as an intangible asset at cost, with an option to measure at fair value if the item is traded on a liquid market, or as inventory at fair value, for broker dealers. “So even though there is no specific standard on cryptos under IFRS, that does not mean that our existing literature would not provide for an accounting treatment,” he said.
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