Friday, June 3, 2011

Workload Forces FASB, IASB to Drop Projects From Convergence Priority List

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 The convergence crush is intensifying, forcing the Financial Accounting Standards Board and the International Accounting Standards Board to drop two projects from their priority list for convergence by their self-imposed deadline of June 30, 2011.The boards have decided to delay until at least later in 2011 their projects on an accounting standard for liabilities and equity and a standard for financial statement presentation.

The liabilities and equity project also fell victim to user and preparer criticism that the current approach by the boards lacked a clear principle and purpose, making it difficult to understand or use. The criticisms also questioned whether the approach really would improve on accounting for liabilities and equity--and distinguish between them--any better than current U.S. generally accepted accounting principles or current international financial reporting standards.

The financial statement presentation project has been controversial since a number of constituents have said it would be too costly, would overburden their systems and certain aspects would prove unnecessary. FASB Acting Chairman Leslie Seidman suggested the possibly of prioritizing its various aspects for possible adoption in more piecemeal approach.  “Maybe some of them are more easily implemented in a shorter time frame and maybe if there's something that's perceived to be extremely costly in it, maybe that's the one that we would phase a little later,” said Seidman. “I don't think it's a foregone conclusion that this has to implemented in one fell swoop,” she said. She added that  the financial statement presentation project requires input from constituents on a proposal that will absolutely fundamentally change the look and feel of the financial statements “[and] I don't think we can go out with this proposal unless we're all standing on solid feet supporting it.”

The suspension of the liabilities and equity and statement presentation leaves financial instruments, leases, revenue recognition, and insurance as the four high priority projects the boards expect to finalize by the end of June 2011.

by Denise Lugo and Stephen Bouvier

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