FASB, IASB Study Convergence Items

November 13, 2002 (PLANSPONSOR.com) - Worldwide accounting standards took a step forward yesterday, as the US-focused Financial Accounting Standards Board (FASB) and its European counterpart divvied up a list of 17 items that may be able to standardized worldwide.

FASB staff members agreed to take the lead on studying nine of the items to see if they would work not only for US companies, but those in other nations as well. FASB’s European counterpart, the International Accounting Standards Board (IASB), will focus on the other eight items.

It’s all part of an ongoing international accounting convergence project being pursued by both accounting organizations.

On the FASB list, according to Dow Jones, are:

  • classification of liabilities upon a refinancing
  • classification of liabilities payable on demand due to breach of borrowing agreement
  • voluntary changes in accounting principles and distinction between changes in accounting principles and changes
  • changes in accounting estimates
  • inventories including idle capacity and spoilage costs
  • non-monetary asset exchanges
  • financial instruments including disclosure presentation, recognition and measurement
  • interim reporting
  • research and development.

Meanwhile, IASB will be studying eight items, according to Dow Jones, including:

  • discontinued operations
  • costs associated with exit or disposal activities
  • government grants
  • depreciation on assets held for disposal or idle assets
  • income taxes
  • long-term construction contracts
  • financial reporting in hyperinflationary economies
  • joint ventures and the proportionate consolidation method.

The European Commission has proposed that all publicly listed companies in Europe be required to adopt international accounting standards by 2005.

FASB plans to issue an exposure draft with its view on as many items under its consideration as possible by mid-2003.

Although it’s not on the short-term convergence project, option accounting remains very much part of the move toward accounting globalization, according to the Dow Jones report.

IASB recently issued a long-awaited exposure draft guiding how options should be accounted for. In an effort to see whether IASB’s proposed accounting treatment would be fit to be used in the US, FASB will soon ask for public comment about it, Dow Jones said.