The SEC was founded as a result of the Securities Exchange Act of 1934. It has the responsibility for enforcing federal securities laws and regulating the securities industry. As a result, it also has the final responsibility for the reporting standards used by non-governmental entities that must file annual reports with the SEC.
In 1973 the SEC designated the Financial Accounting Standards Board (FASB) as the organization responsible for setting the accounting standards for public companies in the U.S. The FASB is therefore responsible for developing US GAAP, the reporting standards currently used by U.S. issuers.
In the same year, 1973, the International Accounting Standards Committee (IASC) began attempting to harmonize accounting across the European Union, issuing standards originally names International Accounting Standards (IAS). On April 1st, 2001, the new International Accounting Standards Board (IASB) took over from the IASC, and continued develop standards now known as International Financial Reporting Standards (IFRS).
In the years since, the SEC has expressed its support for a single set of high-quality global accounting standards. On August 27th, 2008, the SEC set forward a proposal for the use of IFRS by U.S. issuers of financial reports.1 On July 13th, 2012, the SEC staff issued the ‘Final Staff Report on the Work Plan for the Consideration of Incorporating International Financial Reporting Standards into the Financial Reporting System for U.S Issuers’.2 However, the report did not recommend a specific course of action about whether IFRS would be incorporated for U.S. issuers. According to the American Institute of Chartered Professional Accountants (AICPA), there is currently no estimated date for when such a decision by the SEC might be made.
In the meantime, the FASB and the IASB have been working together in order to converge US GAPP and IFRS. In 2002, the FASB and the IASB issued the Norwalk Agreement, and in 2006 the Memorandum of Understanding (MoU), which has since been updated in 2008 and 2010.4 Under this framework, the FASB and the IASB maintain their independent standard-setting process, while working jointly towards improving both US GAAP and IFRS, and minimizing or eliminating differences between the two.
Convergence Projects:
PROJECT |
STATUS |
SOURCE |
|
|
|
Short-term projects |
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Share-based payments |
Completed |
US GAAP, 2004 |
Segment reporting |
Completed |
IFRS 8 Segment Reporting, 2006 |
Non-monetary assets |
Completed |
FAS 153 Nonmonetary Assets, 2004 |
Inventory accounting |
Completed |
FAS 151 Inventory Costs, 2004 |
Accounting changes |
Completed |
FAS 150 Accounting Changes and Error Corrections, 2005 |
Fair value option |
Completed |
US GAAP, 2007 |
Borrowing costs |
Completed |
IAS 23 Borrowing Costs, 2007 |
Research and development |
Completed |
US GAAP, 2008 |
Non-controlling interests |
Completed |
US GAAP, 2008 |
Joint ventures |
Completed |
IFRS 11 Joint Arrangements, May 2011 |
Income tax |
Not a priority |
Joint exposure draft, 2009 |
Investment property entities |
In process |
|
|
|
|
Long-term projects: |
||
Business combinations |
Completed |
US GAAP, 2008 |
Derecognition |
Completed |
US GAAP, substantially converged |
Consolidated financial statements (and disclosure of off-balance sheet risks) |
Completed |
IFRS 10 Consolidated Financial Statements and IFRS 12 Disclosure of Interests in other Entities, May 2011 |
Fair value measurement |
Completed |
FAS 157 Fair Value Measurements, 2006 and IFRS 12 Fair Value Measurement, May 2011 |
Post-employee benefits |
Completed |
IAS 19 Employee Benefits, 2011 |
Financial statement presentation – other comprehensive income |
Completed |
Amendments to IFRS and US GAAP, 2011 |
Financial instruments with the characteristics of equity |
Not a priority |
Joint discussion paper, 2008 |
Investment entities |
In process |
The FASB is considering deliberations considering feedback received on tentative disclosure requirements.6 |
Leases |
In process |
Comments to the May 16, 2013 proposed Accounting Standards Update are being received until September 13, 2013.6 |
Revenue recognition |
In process |
The Boards met last July 24, 2013, and are continuing discussion towards drafting their final standard.6 |
Financial instruments |
In process |
The Boards have received feedback from their last exposure draft and will resume discussion in September 2013.6 |
Insurance contracts |
In process |
Comments to the June 27, 2013 proposed Accounting Standards Update are being received until October 25, 2013.6 |
References:
1. Speech by SEC Commissioner: Roadmap for the Potential Use of Financial Statements Prepared in Accordance with International Financial Reporting Standards from U.S. Issuers. Retrieved from: http://www.sec.gov/news/speech/2008/spch082708ebw.htm.
2. IFRS Work Plan Final Report. Retrieved from: http://www.sec.gov/spotlight/globalaccountingstandards/ifrs-work-plan-final-report.pdf.
3. IFRS FAQS. Retrieved from: http://www.ifrs.com/ifrs_faqs.html#q4.
4. International Convergence of Accounting Standards - Overview. Retrieved from: http://www.fasb.org/jsp/FASB/Page/SectionPage&cid=1176156245663.
5. IASB-FASB Update Report to the FSB Plenary on Accounting Convergence. Retrieved from: http://www.fasb.org/cs/ContentServer?site=FASB&c=Document_C&pagename=FASB%2FDocument_C%2FDocumentPage&cid=1176159985026
6. Project Roster and Status. Retrieved from: http://www.fasb.org/jsp/FASB/Page/SectionPage&cid=1218220137074.