State Board Report

November 2008

It makes sense that there be a single set of high quality accounting standards around the world, Financial Accounting Standards Board Member Leslie F. Seidman told the Annual Meeting audience. Over the years, the differences between the standards issued by the International Accounting Standards Board and the FASB have been narrowed, but there are still some major topics to be reconciled.

Among those topics Ms. Seidman highlighted were: (1) The standard setter’s conceptual framework. (2) Revenue recognition, on which the FASB will issue a discussion document later this year. (3) Financial statement presentation, on which the FASB will issue a discussion document in the fall. (4) Lease accounting to give investors more information. (5) Consolidations and (6)De‐recognitions, which will take a few years for the international and US standard‐setters to agree upon.

For investors to trust the standard‐setters they need to be independent and independently funded, Ms. Seidman observed. The IASB’s funding is still based on voluntary contribution. “Standards are only as good as they are applied, regulated and enforced,” she stated. “I think we have an excellent structure in the US, but we need the same kind of commitment all around the world.” Ms. Seidman said the FASB thinks it is important to decide upon a date to switch over to IFRS with milestones, so there is a more natural, gradual convergence. She said the FASB would have a white paper by early 2009 addressing the convergence date.

When convergence comes, “What is going to happen to Joe the Plumber, Inc.?” asked Judith H. O’Dell, chair of the FASB’s Private Company Financial Reporting Committee. The IASB has been working on IFRS for entities that (a) do not have public accountability and (b) publish general purpose financial statements for external use, and that document is now about 250‐ pages long, she remarked. During the first quarter of 2009 the final document with educational materials will be released. It is expected that countries will be asked by the IASB if they will allow their companies to use these smaller entity standards. This document will be updated only every two years.

Ms. Odell’s committee has been considering, should IFRS be adopted by all public companies, what body would keep GAAP up‐to‐date and how would it be funded? The US may need to have carve‐outs from IFRS for private companies. She encouraged the state boards to think about the impact on state regulation and reminded them that her committee is going out to the public for input and having meetings around the country that include open microphones. She invited participation through signing up for the Committee’s Resource Group (via http://www.pcfr.org/) to receive notification of meeting and meeting summaries. Also she suggested that ideas and opinions could be sent to her, as PCFR chair, through e‐mail at judyodell@dmv.com.

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