In a comment letter filed with the SEC earlier today, FASB's overseer, the Financial Accounting Foundation, noted it has 'refined' its view on the path forward regarding reaching the goal of a set of global accounting standards, referring to the goal of a 'single set' of standards as still being a 'worthy' goal, but emphasising that, as a practical matter, moving toward a 'common set' of standards, with IFRS as the reference point, is a more practical goal 'for the foreseeable future." Excerpts from the FAF letter appear below (subheadings are my own to organize this post, not from the letter; also, for full context, refer to the complete FAF letter, these are simply some highlights).
Note: I talked about an apparent shift in collective references to global standards from a 'common set' - to 'one set' - and perhaps momentum back to a 'common set' - in the 'my two cents; section of a post on June 28, 2009, in which I said:
"[My two cents: In my view, references to the goal of convergence being a 'common set of standards' vs. a 'single set of have varied over time. While some may view the two terms as interchangable, I have noticed a movement from 'common set' to 'single set' in recent years; however, there may be a return to 'common set' in light of concerns voiced in some comment letters and news reports about the timetable proposed in the SEC's IFRS roadmap. Those referring to an ultimate 'single set' of standards generally note that given the widespread worldwide adoption of IFRS, as noted by FASB Chairman Herz in remarks at an FEI conference in September 2007, any such 'single set' of standards accepted globally would likely ultimately be an improved set of IFRS.]"
Highlights from the letter filed by the FAF with the SEC earlier today on IFRS follow.
Path Forward: Reflects Revised Premise that "over time" IFRS will become foundation of US GAAP
"The FAF Board of Trustees (the Trustees) refined its views on the appropriate path forward for financial accounting and reporting standard setting for the U.S. capital markets. The Trustees support the incorporation of IFRS into U.S. GAAP as the appropriate path forward for the continued development of high-quality, investor-focused, international financial reporting standards. Consistent with this support, the Trustees are recommending a number of modifications to the IFRS incorporation approach (colloquially referred to as Condorsement) set forth in the Staff Paper. The Trustees’ recommended approach (described in more detail below) is based on the premise that, over time, international standards will become the foundation of U.S. GAAP. "
Condorsement Sound Concepts Fundamentally: Improvements/Refinements Suggested
"The SEC staff’s Condorsement approach sets forth several sound fundamental concepts for U.S. incorporation of IFRS. In our view, further refinements can improve upon that model and address many of the concerns raised by U.S. stakeholders." [The comment letter then summarizes "what we believe are the major fundamental concepts of Condorsement, as well as certain aspects of the Condorsement approach that we believe would benefit from further refinement."
..."The Trustees fully support an incorporation approach that advances improvements to U.S. GAAP and furthers the comparability and consistency of high-quality, investor-focused financial reporting standards throughout the globe. The incorporation approach recommended in this letter offers a defined and practical course forward toward fulfilling those objectives."
"The recommended approach complements the SEC’s primary responsibility of facilitating investor protection in the U.S. capital markets and reinforces the U.S. standard setter’s mission of setting standards that provide necessary financial information to investors in the U.S. capital markets. Importantly, we believe that the approach recommended in this comment letter achieves the objectives of the Condorsement framework and represents an appropriately measured step forward in the ongoing U.S. commitment to the development of global standards."
"Common Set" - Not Single Set- of Standards, A More Practical Goal for Foreseeable Future
"The Trustees are recommending an IFRS incorporation approach that embraces the concepts of the SEC staff’s Condorsement framework while addressing concerns raised by various U.S. stakeholders. The recommended approach is premised on the belief that although the pursuit of a single set of global accounting standards is a worthy objective, a more practical goal for the foreseeable future is to achieve highly comparable (but not necessarily identical) financial reporting standards among the most developed capital markets that are based on a common set of international standards."
FASB's Role in a Post-MOU World
The FAF's letter recommends that FASB retain its role as the U.S. national standard setter, and in the post-MOU world (after completion of convergence projects outlined in FASB-IASB's updated Memorandum of Understanding), that FASB would not embark on any new projects which the IASB has on its own agenda, but rather would support the IASB's standard-setting efforts on those matters; however, the FASB could initiate its own projects where there is a need for guidance in the U.S. which is not on IASB's agenda.
A Letter Worth Reading!
Even if you aren't a regular reader of comment letters on proposed rulemaking of the SEC or FASB, the FAF's letter may be one of the most important comment letters ever filed, and is written in plain English. Once again, we urge you to read the complete FAF letter for context. See also our blog post coming up shortly, on SEC Chief Accountant Jim Kroeker's remarks on given at FEI's CFRI conference earlier today, on the status of SEC's workplan toward global accounting standards.