The heads of FASB and IASB announced they will take “a few additional months” beyond their June target date to complete priority joint convergence projects on revenue recognition, leases, financial instruments and insurance. This is a reasonable development, and expected by most observers. The original convergence deadlines were optimistic and some thought that inferior standards would result if the projects were rushed. A few quotes below.
David Tweedie, Chairman of the IASB
Leslie Seidman, Chairman of the FASB
David Tweedie: “...if you were listed in the United States using IFRSs you had to reconcile to US GAAP, that showed where the differences were, and what we did was try to look through our standards and if FASB had a better standard, we should take it and vice versa. That was going to take forever so in 2006, the Memorandum of Understanding (MoU) was instituted and that set out a different policy, namely that we should look at certain standards, and for each of these standards, if it was complex or out of date there was no point in trying to converge them otherwise we would just get a complex out-of-date converged standard when what we should really do is write a better one.” “...we have completed most of that program and it’s been a great success, the two sets of standards are much closer together and frankly IFRSs are much better quality than they would have been otherwise.”
Seidman: “We would never let a target date take priority over thorough and robust due process...so let me clarify any misunderstanding about the June 2011 date. It was always intended to be a target, not a deadline, and we always said that achieving the target was subject to the nature and extent of the feedback that we got on each of the exposure documents. At this point on each of the exposure documents we have received significant and very constructive feedback and we are in the process of working through those issues. The quality of the standards remains of the utmost importance. Every board member wants to issue high quality standards that we think are going to withstand the test of time.”
Tweedie: “We have been working on these now for some five years so this is hardly a rush job and what we have done, and I think this is a big change in standard-setting over the past couple of years, is we have gone out deliberately to get high quality in put in addition to that required by our due process. This extensive outreach is something that hadn’t been done to the extent that it is now. We get constant input, and we test these ideas as we finalize the standards.”
Tweedie: “...we would never release a standard before it is ready and ultimately it must be a high quality standard or you just can’t issue it.”
Seidman: “After evaluating the issues yet to be addressed we jointly concluded that, without extending the work out indefinitely, we all could benefit from a few more months to develop these standards, some of which really go to the core issues of many companies.”
Tweedie: “So as Leslie was saying there, we have decided to extend the timetable for a few additional months to enable us to check whether our conclusions will last the test of time. We are also mindful of the G20 target, we have been reminded of that many times over the last few years, and we intend to try to finish this convergence program by end of 2011. The June target has helped us to get there but at the same time it is clear that we need a little more time to check the conclusions, and to ensure that the standards are of the highest quality.”
Seidman: “Let me mention one other thing, we have yet to decide on the effective dates for these standards but we do want to reassure people that we will allow ample time for them to understand the requirements and to plan for an effective transition to the new standards once those decisions are made.”
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