The US Financial Accounting Standard Board (FASB) agreed to kick off a study of the areas where US and international rules might already overlap. FASB will work with the International Accounting Standards Board on the project, according to a Dow Jones news report.
A likely candidate for the project is the smoothing mechanisms now commonly used in framing pension fund liabilities, the Dow Jones story said.
The joint year-long project is being dubbed “short term” because it will focus on differing items for which convergence would appear achievable in the short term, usually by selecting between FASB and IASB generally accepted accounting principles, the Dow Jones story said.
Preparation of the IAS
The IASB and FASB first agreed to the joint convergence project last month. The IASB is in the process of producing a set of standards, known as the IAS, some of which are in conflict with US generally accepted accounting principles.
All publicly listed companies in Europe will be required to adopt international accounting standards by 2005. Australian companies are also converting to IAS.
On Wednesday, FASB agreed to a target date for the joint convergence project of September 31, 2003 in recognition of Europe’s January 2005 deadline.
IASB had approved the convergence project in July. Both boards will now work together to identify areas that can be quickly harmonized. Issues that will require more time will be excluded from the short-term project and moved onto a second phase timetable.
Possible Convergence Items
A list of items to be potentially tackled by the joint short-term convergence project has yet to made public.
But last month, staff members of both boards, with the help of the US Securities and Exchange Commission, had jointly come up a list of 12 to 15 items that could be addressed under the project, Dow Jones said.
Those items could possibly include the issue of transition to new accounting rules, setting against one another the restatement approach favored by IASB and the cumulative catch-up model supported by FASB.