FASB Chairman On IFRS-U.S. GAAP Convergence; Emerging Issues

During a webcast entitled "2011 FASB Chairman's Outlook" earlier today, FASB Chairman Leslie F. Seidman described FASB's major priorities, including efforts on major convergence projects slated for completion by June, 2011, and separate projects to improve U.S. GAAP. Regarding convergence, she noted she would like to have the FASB staff conduct a study and 'inventory' the remaining 'deferred' convergence projects to determine if the differences make a difference to investors, and as a result, potentially reprioritize the 'deferred' convergence projects, and potentially drop some of the convergence projects if the difference between U.S. GAAP and IFRS on a particular project is not significant to investors. In that case, she indicated, FASB may consider adopting the IFRS standard for U.S. GAAP.

The FASB Chairman noted that two priority convergence projects are expected to be completed first quarter, 2011. Those are:

• Fair Value Measurement (including converged definition of fair value); Seidman said this standard would have "minor differences from U.S. GAAP," and
• Statement of Comprehensive Income; Seidman said this standard 'will eliminate Other Comprehensive Income (OCI) in Shareholder's Equity.'

The three priority convergence projects currently on FASB's plate (i.e., slated to be finalized 2nd quarter 2011) discussed in depth by Seidman include:

• Financial Instruments,
• Revenue Recognition, and
• Leasing.

Standards Need To Provide Useful Info; Be Auditable, Enforceable
Seidman noted that, "In recent years, [FASB has] made communication with constituents a priority: we want constituents to be aware of what we are working on, and ... decisions made.."

She added:

We use a variety of means to involve stakeholders in the process
- We webcast our board meetings, and you can observe [the meetings in person] in Norwalk, or London [when the FASB meets jointly with the IASB board in London]
- podcasts, short summaries
- Reaching out proactively to constituents
… to give us more information to assess the costs and benefits [of proposed standards]
o Benefit: does this proposal provide useful information; does it help the company communicate about its own activities
o Cost: [information about the cost] to company to implement, and cost to users of NOT providing this information; we use a variety of [methods] to gather this information

Seidman reviewed FASB's variety of methods of outreach to constitutents (including investors, preparers, auditors and others) and encouraged constituents to provide feedback on proposed standards through comment letters and other means such as field tests and roundtables, and observed:

FASB's goal is to provide useful information to investors, lenders, donors to
nonprofits... [for which] the resulting information fairly presents financial infornmation and performance, so current and potential [investors, lenders and donors]… can make informed decisions about how to deploy their resources...

She added:

Standards also need to be auditable and enforceable, so the resulting information is viewed as a credible presentation of financial information and performance of the entity."

FAF Beta Testing Independent Post-Implementation Review
In response to a question posed by moderator Denise Lugo, a correspondent with BNA, as to whether FASB conducts a post-implementation review of standards, as the IASB does, Seidman
said:

As a matter of fact... the FAF (Financial Accounting Foundation), our oversight body, announced last November they are establishing a function within the foundation for post-implementation reviews of FASB and GASB standards.

The function is independent, but will be staffed by FASB and GASB staff, but [not the staff that worked on development of that particular standard].

My understanding is that a beta test of the process is in the works, and they will select a standard or two in very near future.

I don’t intend to rely on that function [as the only source of post-implemementation feedback] we will keep our normal channels of communication open

SEC Staff Coordinating Meetings On Emerging Issues
Also on the subject of feedback, the FASB Chairman added:

I am very supportive of recent efforts of the SEC staff to provide a series of roundtables… to discuss emerging reporting issues. It offers a really good opportunity to more accurately diagnose, and be sure the right organization… [is addressing the issue]....It is not always a standard-setting matter… e.g. may be an auditing issue… [or other issue].

She indicated participants in such roundtables are a diverse group of SEC/FASB constituents and regulatory/standard-setting agencies.

Calls for such broad-based (multi-agency, multi-constituent) post-implementation review were made by the SEC Advisory Committee on Improvements to Financial Reporting (CIFiR, aka the 'Pozen Committee' for its chairman, Bob Pozen) and others.

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