FASB-IASB Modify MoU
The modification will extend the timetable for some of the major convergence projects, originally slated to be completed by June, 2011.
Letter Sent To G-20 Finance Ministers
You may recall that in September, 2009, the G-20 Leaders (emphasis: G-20 Leaders, not the finance ministers) requested:
"We call on our international accounting bodies to redouble their efforts to achieve a single set of high quality, global accounting standards within the context of their independent standard setting process; and complete their convergence project by June 2011." (source: G-20 Progress Report, Sept. 25, 2009, as described here.)
Concurrent with issuing their joint statement modifying their convergence MoU last week, FASB and IASB also issued a letter to the Minister of Finance of the Republic of Korea, host of the June 4-5 G-20 Finance Ministers meeting, asking that the joint statement be shared with the other finance ministers.
FASB and the IASB explained in their Joint Statement last week:
“As noted in our March 2010 progress report, we recognize the challenges that arise from seeking effective global stakeholder engagement on a large number of projects. Since publishing the March progress report, stakeholders have voiced concerns about their ability to provide high-quality input on the large number of major Exposure Drafts planned for publication in the second quarter ofAmong letters provided by “stakeholders” were two letters sent by FEI Committees, the Committee on Corporate Reporting (CCR letter) and the Committee on Private Company Standards (CPC-S letter). Additional letters can be found here.
SEC Chairman: No Impact On SEC's Timetable for Decision in 2011 on IFRS
In a statement issued on June 2, SEC Chairman Mary Shapiro emphasized the quality and independence of the standard-setting process, in stating:
"Quality financial reporting standards established through an independent process are threshold criteria against which the Commission's future consideration of the role of IFRS in the U.S. reporting system will be based," adding,A Separate GAAP For Private Companies?
"I am confident that we continue to be on schedule for a Commission determination in 2011 about whether to incorporate IFRS into the financial reporting system for U.S. issuers."
With the focus on convergence shining strongly on the potential impact on public companies in the U.S., private companies are also looking at options currently available to them, such as the IASB's IFRS for Small and Medium Sized Entities (IFRS for SMEs), a condensed, standalone set of standards for use by certain private companies (e.g. companies with 'public accountability such as banks cannot use IFRS for SMEs, and the decision whether to accept IFRS for SMEs for statutory reporting is a country-by-country decision).
In the U.S. since the AICPA previously deemed the IASB to be an accepted standard-setter for purposes of signing off on GAAP audits, by definition, full IFRS and IFRS for SMEs would be acceptable in the U.S. according to AICPA audit standards alone. (Whether they are acceptable or desirable by the SEC, users and preparers, as well as other regulators (part of what will be considered by SEC staff under their 'work plan' announced earlier this year) is still an open question.)
However, since private companies do not have to wait for an SEC decision, they are able to consider now whether they want to contemplate switching to full IFRS or IFRS for SMEs, and some companies have previously used - or may want to continue or begin using, yet another "Other Comprehensive Basis of Accounting" or OCBOA as an alternative to U.S. GAAP set by the FASB, which has always been the case for a portion of private companies, particularly smaller ones, given the complexity of GAAP and the fact that the primary users of private company financial statements have voiced a different set of information needs than the users of public company financial statements.
Blue Ribbon Panel Formed
Prompted in part by the issuance of IFRS for SMEs, and the decision by Canada last year to publish its own 'made in Canada' set of GAAP as an option for Canadian private companies to follow, in light of Canada's decision that Canadian public companies will adopt IFRS by 2011, the question of whether there should be two sets of GAAP - also called 'dual GAAP' or 'differential GAAP' by some, i.e. one set of GAAP for public co's, and one set for private co's, came to a head with the November, 2009 recommendation of the Private Co. Financial Reporting Committee (PCFRC's) to the Financial Accounting Foundation (FAF, overseer of the FASB) to consider the future of financial reporting for private companies, related recommendations of the AICPA Council, leading to the formation this year of the Blue Ribbon Panel on Private Company Accounting, co-sponsored by the FAF, AICPA, and NASBA, as covered previously in this blog.
"Made in Canada" GAAP Available to Canadian Private Cos.
Canada's public companies are moving to IFRS in 2011. This raised the question of whether Canadian Private Co's would move to full IFRS, IFRS for SMEs, or existing Canadian GAAP, or some new form of 'made in Canada' GAAP. After seeking public comment, Canada's accounting standard-setters decided to develop a new set of Canadian GAAP as an alternative for Canadian private co's to use to IFRS.
Background on Canada's new private co GAAP can be found on the Chartered Accountants of Canada (CICA) website, e.g. in CICA's Jan. 2010 ROI Newsletter, and in their archived webinars listed on the last page (pg 16) of CICA's June 2010 FYI Newsletter. I would also like to acknowledge I received much helpful information in previous discussions with Mark Walsh, Principal, Canadian Accounting Standards Board (AcSB), and Gordon Heard, Principal Adviser, The Finance Group, and chair of the private companies subcommittee of FEI Canada's Committee on Corporate Reporting.
Learn More: Grant Thornton-FEI Webcast June 22nd
Learn more on an upcoming free webcast brought to you by Grant Thornton and FEI on June 22nd from 1-2:30 pm EST (1.5 CPE) entitled: "Private Company Financial Reporting: Time for a New Approach?" Speakers include John Hepp, Grant Thornton's national partner in charge of accounting principles, FEI Committee on Private Company Standards members George Beckwith and Andy Thrower, and Meredith Vogel, audit senior manager at GT, currently a staff fellow at the FAF supporting the Blue Ribbon Panel on Standard Setting for Private Companies. Register here for the webcast.
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