There was an initial agreement in 2002 (the Norwalk Agreement) during which the US and IFRS standard setters decided to converge their accounting standards. Significant progress has been made with new standards or major amendments of at least one set of standards in the areas of Segment Reporting, Consolidated Financial Statements, Fair values, Business Combinations and numerous others.
There has however, been less progress in important areas such as Deferred Tax, Impairments, and Leases. Some of these areas are not being addressed at all at present.
One recent success is the issuance of the fully converged revenue recognition standard which has been adopted by both the FASB and the IASB.
The leases project is so mired in the positioning of the relevant interested parties (preparers, auditors, lessors, lessees and the capital markets to name a few) that it seems unlikely any truly converged standard will appear. It may well be the case that each body releases a new leasing standard but the content is likely to be different in order to meet the demands of the interested parties in each jurisdiction.
One recent success is the issuance of the fully converged revenue recognition standard which has been adopted by both the FASB and the IASB. Revenue is critical to the understanding of most companies’ reports and the release of this new standard does give cause for some hope.
Unfortunately the Financial Instruments projects are nothing like as converged. This area of accounting is arguably equally important to revenue recognition for many businesses and industries such as banking. The IASB has finalised IFRS 9 including hedge accounting but the US standards are a long way from being finalised. For example the US hedging project is only at a research stage.
Convergence relies on the sorting out of the above issues and many more besides. It is looking very unlikely that we will get clear convergence between the two sets of standards and it may be time for the two accounting standard setting bodies to decide that there has been as much convergence as there is going to be. The length of time taken on the latest projects partly proves this point as consultation between the two bodies has almost certainly slowed down the release of the standards in very important areas.
It is unfortunate that there has not been fuller or timelier convergence between these two major sets of standards in the world but we may have to accept that we are nearly as close as it is going to get.