Comparison between U.S. GAAP and International ... - Grant Thornton

Comparison between U.S. GAAP and International Financial Reporting Standards 4
Preface
Approximately 120 countries require or permit the use of International Financial Reporting Standards (IFRS)
issued by the International Accounting Standards Board (IASB). Although the United States is not one of
them, there has been significant progress on converging U.S. GAAP with IFRS over the course of many years.
In September 2002, the Financial Accounting Standards Board (FASB) and the IASB issued a memorandum of
understanding (the Norwalk Agreement) wherein they “acknowledged their commitment to high-quality,
compatible accounting standards that could be used for both domestic and cross-border financial reporting.”
In February 2006, the Boards issued A Roadmap for Convergence between IFRSs and US GAAP – 2006 - 2008;
Memorandum of Understanding between the FASB and the IASB and reaffirmed their commitment to the
convergence of U.S. GAAP and IFRS. In September 2008, the Boards issued an update to the 2006
Memorandum of Understanding. In November 2009, the Boards issued a joint statement, FASB and IASB
Reaffirm Commitment to Memorandum of Understanding, describing their plans and milestone targets for achieving
the goal of completing major joint Memorandum of Understanding projects by the end of June 2011. In June
2010, the IASB and FASB announced the issuance of a joint statement on revisions to their convergence work
plan. The target completion dates for a few projects were extended beyond the first half of 2011. It is expected
that this action by the IASB and FASB will not negatively impact the Securities and Exchange Commission’s
consideration in 2011 of whether and how to incorporate IFRS into the U.S. financial system.
For many years in the United States, the Securities and Exchange Commission (SEC) required all foreign
private issuer (FPI) companies to provide a reconciliation between their home-country required generally
accepted accounting principles and U.S. GAAP. A number of parties had expressed interest in both the
removal of the reconciliation requirement for FPIs using IFRS and in the acceptance of IFRS as a set of highquality,
transparent global accounting standards. In December 2007, the SEC adopted a final rule, Acceptance
From Foreign Private Issuers of Financial Statements Prepared in Accordance With International Financial Reporting Standards
Without Reconciliation to U.S. GAAP, allowing FPIs whose financial statements are prepared using IFRS as
issued by the IASB to file their financial statements without reconciliation to U.S. GAAP. In August 2007, the
SEC issued a concept release on allowing U.S. issuers to prepare financial statements in accordance with IFRS.
On November 14, 2008, the SEC issued its proposed Roadmap for the Potential Use of Financial Statements Prepared
in Accordance with International Financial Reporting Standards by U.S. Issuers (the Roadmap), which could lead to a
requirement for U.S. issuers to use IFRS as issued by the IASB as early as 2014. The Roadmap proposed
milestones that the SEC would assess in 2011 in order to determine whether to proceed with rulemaking to
mandate the use of IFRS by all domestic issuers, including:
Improvements in IFRS accounting standards
Adequate accountability, independence and funding of the International Accounting Standards Committee
Foundation
Availability of more detailed tagging for interactive reporting
Advances in IFRS education and training
© 2011 Grant Thornton LLP
All rights reserved
U.S. member firm of Grant Thornton International Ltd