There is a lot of talk of the convergence project undertaken by Financial Accounting Standards Board (FASB) and International Accounting Standards Board (IASB).
But why is the convergence project and not the adoption project. Adoption would mean that the Securities and Exchange Commission (SEC) sets a specific timetable when publicly listed companies would be required to use International Financial Reporting Standards (IFRS) as issued by the IASB to prepare their Financial Statements. Convergence on the other hand means that the FASB and the IASB would continue working together to develop high quality, compatible accounting standards over time. More convergence will make adoption easier and less costly and may even make adoption of IFRS unnecessary. On the other hand, if IFRS is not adopted completely, the differences between the two standards will not all be eliminated completely and there will still be need to reconcile the two.
To completely eliminate the differences between the two standards is easier said than done. There is a long history behind US Generally Accepted Accounting Standards (GAAP), the accounting standards governing the US based corporations. To completely give up the present standards and adopt IFRS is definitely not prudent and also not feasible. It isn’t a switch that can be turned off, there is a lot of history and knowledge that is the basis of GAAP, and it is best to find a solution that would leverage the knowledge base. And so a gradual shift through convergence is a much more viable and effective approach.
But be it convergence or adoption, it is a definitely a big step towards standardizing the accounting field and towards making accounting a global profession.
