IFRS (pt.1)

The second chairman of the International Accounting Standards Board (IASB) is Hans Hoogervorst, who previously held office as co-chair of the Financial Crisis Advisory Group and chair of the IFRS Foundation Monitoring Board, a collection of financial market regulators that includes the SEC's Mary Schapiro. 

There are several noteworthy issues surrounding the proposed IFRS/GAAP convergence. We will address those, but first give a brief update of the current status of the convergence project. 

The 1933 and 1934 Securities acts were disclosure statutes, and the 1934 act gave rise to the SEC. This had to be created to regulate the markets. The SEC delegated authority to the Committee on Accounting Procedure. This committee was initially run by the American Institute of Accountants, which is now the AICPA. Later, in 1973, the FASB was created, which replaced the former CAP and APB. Thus the FASB is the U.S. standard-setter by mandate of the SEC. 

From the international angle, the IASC was formed in 1973, perhaps to preempt a European accounting standard-setting body. This commission published the IAS 1 - IAS 41, which were mainly affirmations or endorsement of common accounting practices.  Then, in 1987, the International Organization of Securities Commissions (IOSCO) stated a willingness to endorse the IASC’s standards, stipulating that this would require the IASC to eliminate many of alternative methods. This took place in 1993.

In 2001 we witnessed the formation of a new professional board, the IASB, which was funded by volunteers. Much of their early work was to amend former IAS statements. Then the "Norwalk Agreement" in 2002. This became a pivotal step in the convergence process. Signed in Norwalk by the IAS and FASB, the Memorandum of Understand initiated an active program toward convergence, with the following goals: 

• Eliminating minor differences in the short run.
• Aligning the IASB and FASB work plans to eliminate other differences.
• Agreement to continue working jointly on current projects.
• Encourage their interpretive bodies to coordinate their work.

The MOU was updated in 2008, based on an SEC roadmap. Currently the FASB and IFRS are addressing the following three topics:

• financial instruments
• leases
• revenue recognition

Financial statement presentation and liability and equity distinctions are also on the docket, but are not currently being addressed. All for now.