The International Accounting Standards Board (IASB) and the Financial Accounting Standards Board (FASB) of the United States have signed a memorandum of understanding, formalising a commitment to convergence of US and international standards.
The boards will now work towards an agreed principles-based approach covering key standards for business acquisitions, financial performance and revenue recognition.
The agreement means companies will have to comply with a single set of accounting principles in both Europe and the US, and the Boards hope to issue an exposure draft of the new proposals next year.
Sir David Tweedie, Chairman of the IASB, said *”This underscores another significant step in our partnership with national standard setters to reach a truly global set of accounting standards. By drawing on the best of the US Generally Accepted Accounting Principles (GAAP), IAS and other national standards, the world’s capital markets will have a set of global accounting standards that investors can trust.”*
The IASB and FASB are considered the world’s two most influential accounting standards boards.
The **International Accounting Standards Board**, based in London, began operations in 2001 taking over from the former part-time IASC founded in 1973. It is funded by contributions from the major accounting firms, private financial institutions and industrial companies throughout the world, central and development banks and other international and professional organizations.
The IASB is committed to developing, in the public interest, a single set of high-quality, global accounting standards that require transparent and comparable information in general purpose financial statements.
In pursuit of this objective, the IASB cooperates with national accounting standard setters to achieve convergence in accounting standards around the world.
Since 1973, the **Financial Accounting Standards Board** has been the designated organisation in the private sector for establishing standards of financial accounting and reporting in the United States. Those standards govern the preparation of financial reports and are officially recognised as authoritative by the Securities and Exchange Commission and the American Institute of Certified Public Accountants.
Such standards are essential to the efficient functioning of the economy because investors, creditors, auditors and others rely on credible, transparent and comparable financial information.
**Bahamas Accountancy Profession**
Wayne Aranha, President of the Bahamas Institute of Chartered Accountants (BICA), the governing body for the accountancy profession in The Bahamas, says this commitment to harmonise US and international standards bodes well for accountancy around the world.
The agreement presently relates to companies in both Europe and the US, but given the importance of capital markets in those areas and the influence that they play in the development of standards around the world, it can be expected that most other countries will follow.
BICA has designated standards promulgated by IASC (and now IASB) as the accounting standards to apply in order to conform to a true and fair presentation of financial statements.
Mr. Aranha confirmed that BICA, many of whose members have qualified in the US, welcomes this convergence of standards. *”As barriers to trade and investment are eliminated, cross-border activities will continue to grow. BICA endorses the desire for one set of globally accepted standards that could withstand the tests or reliability, credibility and comparability – from company to company and jurisdiction to jurisdiction,”* he said.