06 December 2011

FASB: Speech by Leslie Seidman on current SEC and PCAOB developments

At the AICPA National Conference on Current SEC and PCAOB Developments held on December 6, 2011 in Washington, FASB chairman, Leslie Seidman, discussed global accounting standards and the possible future endorsement of IFRSs by the US SEC.

Ms Seidman outlined the approaches towards incorporating IFRS into US GAAP and focusing more attention on private company reporting issues. Both are intended to promote greater comparability while maintaining high-quality accounting standards. But they are also intended to ensure that issues specific to individual constituencies are recognised and dealt with in a way that does not unnecessarily increase cost or add complexity.

Ms Seidman explained why the FAF and the FASB believe that the path to international accounting standards – and to addressing the needs of private company stakeholders – that she outlined would best enable them to fulfil their mission in the current environment.

In regard to the convergence phase the FASB would very much like to work together with the IASB to complete the priority projects on revenue recognition, leasing, financial instruments and insurance. However, the FASB does not believe indefinite convergence is a viable option, politically or practically. As any observer can see, this process is challenging technically and administratively. Plus, the FASB appreciates that the IASB, as an international body, must be responsive to the priorities of other countries that have already adopted IFRS.

Second, the FASB would look to the IASB to set new accounting standards for the US. This would put the US on record as accepting IFRS as the basis for its accounting standards, moving forward. The FASB would refrain from setting standards that are on the IASB’s active agenda, and would not be at the table debating new issues jointly. The FASB would, however, play a key role in gathering input, conducting research, coordinating field work, assessing the need for implementation guidance, and managing post-implementation reviews with US stakeholders. The idea is that the IASB would participate in these activities, but FASB would be the focal point for coordination in the US.

This type of role is supported by other national standard-setters, because in order ultimately to endorse a standard for a country or region, they have to have been an active participant in these processes themselves.

The benefit of a strong role for the FASB and other US stakeholders is that, as active participants, the FASB are more likely to be satisfied with the process, so that in the end, the FASB would be much more likely to endorse the standard.

Regarding the evaluation of the remaining differences, the US is in a different starting point from other countries. Ms Seidman believes it is not in the best interest of investors to withdraw GAAP in areas where there is no clear accounting standard under IFRS, such as in the case of rate regulation.

Full speech

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