FAF Comments on SEC 'Condorsement' Paper
The Board of Trustees of the United States Financial Accounting Foundation (FAF), the oversight body for the Financial Accounting Standards Board (FASB), has written to the United States Securities and Exchange Commission (SEC) in relation to the SEC's May 2011 paper on the possible incorporation of International Financial Reporting Standards (IFRS) into U.S. GAAP (the 'condorsement' approach).
The FAF Board of Trustees recommend an IFRS incorporation approach that embraces the concepts of the 'condorsement' framework whilst also addressing concerns raised by various U.S. stakeholders. The submission notes:
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
The FAF Trustees offer many recommendations to 'refine' the condorsement approach, including:
- Active U.S. involvement in and support of international standard setting. This would include FASB (and other standard setters) having 'nonvoting observer rights' on the IASB, regular meetings between the IASB and FASB, and the FASB being responsible for IASB due process, outreach and other activities in the United States
- Evaluation criteria. The FASB would develop criteria for the possible endorsement of IASB standards into U.S. GAAP, including such aspects as investor primacy, independent standard setting, due process and benefits exceeding costs
- Role of FASB. The FASB would agree not to undertake separate projects on topics on the IASB's technical agenda, but would retain authority to set its own technical agenda. After completion of the existing convergence projects, the FASB would consider remaining major differences between US GAAP and IFRS and conduct thorough due process for potential incorporation of the IFRS requirements into U.S. GAAP.
The letter also discusses other topics such as funding of the IASB and further periodic reviews of the approach.
Click for full text of the FAF Trustees letter to the SEC (link to FAF website).