FASB chairman Russell Golden and IASB chairman Hans Hoogervorst gave a joint presentation at Financial Executives International's annual. The FASB/IASB relationship was an informal one. That changed in —The FASB Expresses Support for Internationalization of Standards. By the late . The relationship between the SEC and the FAF and the FASB is an and the FASB helps both organizations further our core missions. IFRS.
Two of my distinguished predecessors — Mary Schapiro and Elisse Walter — spoke at your dinner in and Last year, shortly after I became Chair, I enjoyed attending your dinner, and this year I am honored to have the chance to address you. That objective may sound dry and technical to some, but the importance of the work you do — and that the SEC and the FASB do together — cannot be overstated.
Consistently applied comprehensive accounting standards are essential to providing investors with the information that they need, which in turn instills confidence in our capital markets and encourages capital formation. For almost 80 years, the Commission has looked to the private sector for leadership in establishing and improving U.
The impact of high quality accounting standards to both strengthen and steady the capital markets can be attributed, in large part, to the private sector standard-setting process overseen by the Commission.
And for more than 40 years, the FASB has been that private sector standard setter. The Importance of Accounting Standards At its core, financial reporting, using accounting standards adopted by the FASB, is a critical component of communication between a company and its investors. And, as I will discuss later, these standards must be enforceable, and in fact, enforced. But the work is not done when the standards are set. In fact, in many ways, the work, for you and for us, really just begins when the standard is adopted.
What is the Relationship Between the IASB & the FASB? | Bizfluent
Implementation of new standards provides an opportunity, particularly during the transition period, to monitor and, if necessary, provide guidance that promotes consistency. And consistent application of accounting standards is fundamental to the efficacy of the standards and, more importantly, to maintaining fair and efficient capital markets. Consistent implementation and application of the new revenue recognition standard will require careful consideration of the questions that we all know will arise during the transition from the old standard to the new one.
To strengthen this effort, the FASB has created an implementation group of stakeholders to serve as a resource to address implementation issues as the transition to a new revenue recognition standard occurs. Implementation of any new standard is a collective effort and one that needs thinking from a cross-section of affected participants — preparers, auditors, investors, regulators, users, and other stakeholders — as well as from members of the IASB and FASB.
And the SEC has an important a role to play. The staff will actively monitor implementation of the new standard to help limit inconsistencies in application and will also seek out the views of investors, issuers, auditors, the PCAOB and others. Today, over companies representing trillions of dollars in aggregate market capitalization report to us under IFRS with no reconciliation. And the SEC staff enforces those standards.
By any measure, we have thus demonstrated a major commitment to the use of IFRS in our markets. But, the question remains — what about domestic issuers?
As I am sure you are all aware, partly because you have heard me say it before, during my first year at the Commission, we have been intensely focused on making meaningful progress towards completing the statutorily mandated rulemakings from the Dodd-Frank and JOBS Acts.
And that is still a major goal. And, it continues to be. I strongly agree with these sentiments.
- What is the Relationship Between the IASB & the FASB?
But there are other questions we are being pressed to answer by, among others, our international regulatory and accounting counterparts. They want to know whether, and, if so, when and how is the United States — and more particularly the SEC — going to incorporate or otherwise speak again as a Commission to the issue of further incorporation of IFRS into the domestic capital markets.
The Commission last spoke on these questions in February when it said that: I cannot answer these questions tonight — while we continue to consider the issue. But they are important to answer and I hope to be able to say more in the relatively near future. Enforcement Turning back to the SEC and FASB work on accounting standards, it is important to spend a few minutes discussing enforcement of the standards.
The SEC enforces U. GAAP as developed by the FASB to ensure that issuers are meeting their financial reporting obligations under the federal securities laws. Enforcement happens primarily in two ways.
Remarks at the Financial Accounting Foundation Trustees Dinner
When Corp Fin believes that a company could enhance its disclosure and improve its compliance, they issue comments advising the company to revise its disclosure. The report also identified the characteristics of high-quality standards and of a high- quality global standard setter. Explores Adopting International Standards Beginning in the s, efforts to harmonize accounting standards internationally evolved into a broad convergence effort.
Several other countries, including Canada, Korea, India and Brazil, had committed to adopt international standards by GAAP and international standards. In latethe SEC issued a proposed Roadmap that, if adopted, could result in the mandatory use of international standards by U. SEC registrants as early as At inception, it had 14 Board members from 9 countries, including the U. The Norwalk Agreement set out the shared goal of developing compatible, high-quality accounting standards that could be used for both domestic and cross-border financial reporting.
Comparability in International Accounting StandardsâA Brief History
It also established broad tactics to achieve their goal: That policy statement also said that the SEC expects the FASB to consider, in adopting accounting principles, the extent to which international convergence of high-quality standards is necessary or appropriate in the public interest and for the protection of investors Policy Statement.
GAAP the F reconciliation. The proposed Roadmap identified several milestones that, if achieved, would support eliminating the reconciliation. In the MoU, the two Boards reaffirmed their shared objective of developing high-quality, common accounting standards. The MoU elaborated on the Norwalk Agreement, setting forth the following guidelines in working toward convergence: Convergence of accounting standards can best be achieved by developing high- quality, common standards over time.
Instead of trying to eliminate differences between standards that are in need of significant improvement, the Boards should develop a new common standard that improves the quality of financial information. Serving the needs of investors means that the Boards should seek to converge by replacing weaker standards with stronger standards MoU.
After considering the input received, the SEC issued a final rule eliminating that requirement in December Final Rule. The Concept Release sought public input on whether to give U. Under the proposed Roadmap, the Commission would decide by whether adoption of IFRS would be in the public interest and would benefit investors. The SEC also proposed that U. Most recently, in a joint meeting held in Octoberthe FASB and IASB reaffirmed their commitment to convergence, agreed to intensify their efforts to complete the major joint projects described in the MoU, and committed to making quarterly progress reports on these major projects available on their websites.
As a further affirmation of that commitment, the Boards issued a joint statement describing their plans and milestone targets for achieving the goal of completing major MoU projects by mid The Statement makes clear that the SEC continues to believe that a single set of high-quality, globally accepted accounting standards would benefit U.
Continues to encourage the convergence of U. GAAP and IFRS Outlines factors that are of particular importance to the Commission as it continues to evaluate IFRS through Directs the staff of the SEC to develop and execute a work plan Work Plan that transparently lays out specific areas and factors for the staff to consider before potentially transitioning our current financial reporting system for U.
FASB reports periodically on the status of their project to improve and converge U.
Abstract not currently available in this view
In Junethe FASB and IASB agreed to modify their joint work plan to a prioritize the major projects in the MoU to permit a sharper focus on issues and projects for which the need for improvement is most urgent and b phase the publication of exposure drafts and related consultations to enable the broad-based and effective stakeholder participation that is critically important to the quality of the standards.
It also describes how the Boards modified aspects of their plans for other projects in order to put them in the best position to complete the priority projects by the June target date. Read the full meeting report.
The Boards were giving priority to three remaining projects on their MoU financial instruments, revenue recognition, and leasing as well as their joint project on insurance. The Boards also agreed to extend the timetable for those priority projects beyond June to permit further work and consultation with stakeholders in a manner consistent with an open and inclusive due process.