Fasb and Iasb Convergence: Asymptotic Relationship or Transmogrification?

INTRODUCTIONFor almost the past sixty years various accounting entities have been discussing and working toward the possibility of a single global set of accounting principles, and much has been written over the years regarding the attempts at both convergence with and adoption of international standards by various countries. The movement toward these international standards accelerated in 2001 when the International Accounting Standards Board (IASB) was formed, and further in 2002 when IASB and the Financial Accounting Standards Board (FASB) decided to work together. According to the AICPA IFRS Resources (AICPA 2014) at this point there are 90 countries that have fully adopted the international standards with another 30 permitting their use for listed companies, and others such as Japan discussing their own convergence plans. However, the United States is still working on, and hopeful for, convergence rather than adoption. This paper discusses some reasons that neither convergence nor adoption of the international accounting standards by the United States have been attained.THE CHRONICLES OF CONVERGENCEWell before 1973, in the 1950s, accounting entities from various countries were considering and discussing a possible uniform set of international accounting standards as commerce became more global and more cross-border transactions and consolidations were taking place. Interestingly, the first textbook on international accounting, International Accounting by Gerhard Mueller, was published in 1967, six years before the formal creation of the International Accounting Standards Committee (IASC.)In 1973 nine countries, including the United States, formed the International Accounting Standards Committee. Their plan was to create international accounting standards (IAS) that could be used by firms in different countries to make their reporting more comparable across nations and across borders. In 2000 they decided to reorganize to make the standard setting body more formal, and so in 2001 they were replaced by the International Accounting Standards Board (IASB.)Many countries other than the United States, including Fiji, Moldova, and Tajikistan, to name a few, have directly adopted the International Financial Reporting Standards (IFRS) created by IASC and IASB for their public companies. The European Union countries adopted IFRS with some modifications, called carve-outs. However, the United States Financial Accounting Standards Board (FASB) chose in 2002 to work on a convergence project with IASB (Norwalk Agreement) rather than a full adoption of the IFRS, although the latter has remained a possibility as well.To aid the convergence of FASB and IASB standards, the two bodies issued a Memorandum of Understanding in 2006 to lay out a plan for this convergence as a series of projects revising both FASB and IASB standards on similar topics so the treatment for both IFRS and GAAP would essentially be the same. They modified the document in 2008, revised the work plan in 2010, and have made some progress by issuing a variety of new standards including the most recent, detailing new revenue recognition rules.In 2007 the Securities and Exchange Commission (SEC) decided to consider allowing United States firms listed on U. S. exchanges to use IRFS as an alternate reporting form to U.S. generally accepted accounting principles (GAAP). However, the Financial Accounting Foundation (FAF) and FASB both felt that allowing a dual system of reporting would be too complex and costly to the firms, and possibly confusing to users of financial information. More recently, in 2010, the SEC reiterated the appeal of a single global set of accounting standards, and in 2012 reported on specific issues relevant to the Commission's determination as to where, when and how the current financial reporting system for U.S. issuers should be transitioned to a system incorporating IFRS. (Financial Accounting Standards Board 2013). …