FASB and IASB Working Together to Satisfy G-20 Goals Says Advisory Group

The FASB and IASB are working together to meet the G-20 goals of improved valuation standards and achieving a single set of high-quality global accounting standards. In a letter to the G-20, the Financial Crisis Advisory Group said that the two Boards are working jointly to improve and converge standards and have given priority to areas highlighted by the financial crisis.

The IASB decided to adopt approaches consistent with the recent FASB guidance on fair value for illiquid markets and fair value disclosure. While the IASB decided not to implement the FASB staff’s approach to credit loss impairment for available-for-sale debt securities, it did decide to work with FASB to issue this year a converged proposal to dramatically simplify their standards for financial instruments, which is expected to include a common credit loss impairment approach for loans and debt securities.

The Financial Crisis Advisory Group called on both standard setters to work with the Financial Stability Board and the Basel Committee to address the provisioning and valuation recommendations of the FSB and the G-20. A working group to be run by the Basel Committee is being established to develop positions.

In the G-20 letter, FCAG said that the Boards are working together, and in consultation with key regulators, will issue a comprehensive proposal later this year to improve and streamline the reporting of financial instruments. The FCAG also believes that valuation and off-balance sheet standards particularly need improvement. The group is convinced that improved standards in these areas, and also in the provisioning area, which is of particular importance to regulators, can increase transparency and preserve financial statement integrity.

The IASB issued proposed improvements in the area of off-balance sheet items earlier this year and is working jointly with FASB in this area. The FASB is expected to soon issue improvements to the current US standards in this area. These projects follow a number of other improvements the Boards individually and together have been making over the past several months. In the view of FCAG, the two Boards have provided globally consistent fair value measurement guidance for inactive markets and enhanced fair value disclosure requirements. In May, the IASB is expected to publish a proposal to enhance disclosures related to fair value measurements.