International accounting standards and private company reporting are “two of the most important issues facing our profession, our capital markets, and our companies,” FASB chair Leslie Seidman said in her remarks to the AICPA national conference on SEC and PCAOB issues last week. Although the convergence process has advanced global financial reporting in several key areas, Seidman believes that a “side-by-side convergence model is not . . . optimal.” Instead, she outlined a five-point approach:

1. The FASB will complete the priority convergence projects with the IASB.
2. The FASB will look to the IASB to set new accounting standards, while also actively participating in that process, to eventually endorse the final standards for incorporation into U.S. GAAP. “The key elements of the process include investor primacy, independent standard setting, robust due process, a considered cost-benefit analysis, and clear and adequate guidance,” Seidman said.
3. The label “U.S. GAAP” will remain effective to avoid several practical problems, such as the need to change debt covenants, which often refer to U.S. GAAP as a benchmark.
4. The FASB will evaluate any remaining differences between U.S. GAAP and IFRS, and develop a plan to address them.
5. The FASB will retain the ability to set standards for the U.S. if there are topics of considerable importance that are not on the IASB’s active agenda or if the IASB doesn’t provide timely or adequate implementation guidance.

As to the second “elephant in the room”—private accounting standards—Seidman said the FASB has declined to establish a new, separate board to set GAAP for private companies. Instead, the Board’s parent company, the Financial Accounting Foundation (FAF) will propose a Private Company Standards Improvement Council, to be chaired by a FASB member and reporting to the FAF trustees (see BVWire #109-2). “Underlying this recommendation is the FAF’s belief that, over time, the standards of two entirely separate boards will inevitably diverge, despite their best intentions,” Seidman added, encouraging all interested parties to share their views with the FAF “on this important issue” by Jan. 14, 2012. For the complete text of Seidman’s remarks, click here.