The concept of convergence first surfaced in the late 1950s in response to World War II economic integration showing that the idea of International Convergence of Accounting Standards is not new. At first, the convergence focused on the principles used in major capital markets around the world. By the 1990s, the idea of harmonization was replaced by the notion of convergence and the International Accounting Standards Committee was formed in 1973, which was the first international standards-setting body.
The FASB and the IASB have been working together toward convergence since 2002. The Financial Accounting Standards Board believes that the ultimate goal of convergence is a single set of high-quality, international accounting standards that companies would use for financial reporting. Currently, the collaborative efforts of the FASB and IASB is used to both improve U.S. GAAP and IFRS to eliminate the differences between the two.
In November 2009, a joint statement showed the IASB and the FASB reaffirmed a commitment to improving IFRS and US GAAP in achieving convergence. The plan gave priority to the major Memorandum of Understanding projects for which they believe the need for improvement of IFRS and GAAP is most urgent. The projects include joint projects on financial instruments, revenue recognition, fair value measurement, and the consolidation of investment companies. After their meeting in April 2011, the boards are providing this report on the progress of their joint convergence work.
The IASB and FASB have taken the following actions since their report last November. They have completed the five projects, which reflected the completion of MoU projects, publication of standards that are converged or substantially converged on fair value measurement, joint arrangements, and consolidated financial statements. Most of the short-term projects have been completed such as share-based payments, non-monetary assets, inventory accounting, accounting changes, and fair value option. The FASB is developing proposals to align US GAAP with IFRS and that project is still in process.
As far as the Revenue recognition goes, the principle of the IASB and FASB published a joint discussion paper that proposed a single revenue recognition model that was built on the notion that an entity should recognize revenue. The US GAAP has a wide range of requirements while the IASB has very general requirements, which causes them to rely on US GAAP for specific guidance.
On June 4, 2004, The FAF met with the members of the International Accounting Standards Committee Foundation for the first time in New York City. The meeting began with the FASB chairman, Bob Herz, on the convergence efforts of the two-standard-setting bodies. The chairman explained the goal of their convergence efforts and the progress made to date.
FASB and IASB have a number of common projects and have agreed to a plan for future alignment of their technical agendas. The article from the FASB report explains how their respective strategies for reaching their common convergence goal and the obstacles they face together in meeting that goal.