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The evolution of the relationship between the US financial accounting standards board and the international accounting standard setters: 1973-2008.

RESTRUCTURING THE IASC (66)

A number of internal and external factors triggered the recognition by IASC Chairman Sharpe and Secretary-General Carsberg that the IASC needed to consider its future mission and structure once the IASC/IOSCO Work Programme had been completed. One need was to improve relations with national standard setters to realize a "complete harmonisation between international standards and standards used for domestic reporting." This could be achieved, on the one hand, through "working with governments and governmental agencies to encourage official adoption of international standards" and, on the other, "[w]orking with national standard setters to co-ordinate agendas and attempt to agree common solutions." Another factor for considering the IASC's future mission and structure was a desire to enhance the global representativeness of the Board by enlarging its country membership seats. (67)

Before the Executive Committee meeting in June 1996 Carsberg released an agenda paper, Future Strategy of IASC, (68) for the Executive Committee and Advisory Council to discuss at their forthcoming joint meeting. That meeting (69) was the scene of a lively debate, after which the participants agreed that Carsberg should draft terms of reference for a working party to consider the future strategy of the IASC.

June 1996 was an eventful month for the IASC. In addition to its joint Executive Committee and Advisory Council meetings, it participated in the World Standards Setters meeting. On June 21, FASB Chairman Beresford delivered a series of eight suggestions for IASC procedural changes to reinforce the IASC's importance in the internationalization of accounting: (1) hold meetings open to the public; (2) consider additional procedures, such as public hearings on proposals and field testing, to ensure that it received and considered the best possible input; (3) better educate its members on the intricacies of matters under consideration; (4) send materials to Board members "well in advance" of meetings (some Board members complained they had too little time to consider them) for careful analysis by home country associates and for development of carefully reasoned positions; (5) greatly increase the size of its staff to do the technical support work for its steering committees; (6) resolve the matter of implementation guidance for IASs; (7) find a way to "reduce the inherent conflict of interest when an all-part-time Board sets standards its own members must follow and audit"; and (8) be realistic in its work plans and commitments to develop a complete set of IASs. Beresford felt it was "highly unrealistic" to expect to complete the Core Standards Programme by March 1998. (70) Many of his suggestions were implemented by the IASC/ IASB, including open public meetings, implementation guidance with the creation of the interpretations committee, IASB's greatly increased staff compared to IASC's, and elimination of the "inherent conflict of interest" with the introduction of the largely full-time IASB. In the coming years, Beresford's public comments were repeated and elaborated upon in public and private by the FASB and SEC members who participated, officially and unofficially, in the work of the IASC's Strategy Working Party.

THE STRATEGY WORKING PARTY (71)

At the September 1996 Executive Committee meeting, Carsberg introduced an agenda paper (72) that presented his proposal for the establishment of a Strategy Working Party (SWP). The Executive Committee and the Board approved the SWP's terms of reference. IASC Chairman Sharpe and Secretary-General Carsberg asked Ed Waitzer, a lawyer and former Chairman of the Ontario Securities Commission and of the IOSCO Technical Committee, to become chairman of the SWP, and he accepted. In August 2001, Carsberg commented, "[W]e felt pretty sure that Ed Waitzer ... was somebody in good standing with the SEC ... who could go to the SEC and talk about things and at the same time be well received there but take a somewhat independent view." (73)

At the SWP's first meeting on July 21-22, 1998, in London, Carsberg described the IASC's core standards agreement with IOSCO and the SEC's response. Former SEC Chairman David Ruder then discussed the likelihood that the SEC would accept the IASC's core standards once they were completed. Ruder emphasized that "the SEC will act cautiously and wish to retain oversight authority over the setting of accounting standards used in the securities market." During this meeting, the SWP began to use the term "convergence," which ultimately came to supplant "harmonization" in the IASC's deliberations and publications [Camfferman and Zeff, 2007, pp. 450-454].

The European Commission expressed support for a large (27-member), geographically representative part-time Board, with a full-time Chairman. The SEC supported a FASB-like fulltime Board with at least seven technically expert members. SEC Chief Accountant Lynn Turner played an important role in pushing the SEC's position, often behind the scenes. (74) G. Michael Crooch, Arthur Andersen Partner and IASC Executive Committee member, knew Turner and talked with him frequently about strategy. (75) FASB Chairman Edmund Jenkins likewise worked behind the scenes to encourage the IASC's restructuring. (76) Key G4 players favored a full-time, small, independent international board with technical expert members; any other model would result in the G4 pursuing an alternative solution [Street 2005, pp. 73-76].

Secretary-General Carsberg quickly came to support the SEC's position; his Chairman, Stig Enevoldsen, had to be convinced to abandon the European preferred model. In the end, Enevoldsen came to support the full-time Board, provided it had some part-time members to represent real world thinking on current business developments. (77)

Enevoldsen and Carsberg had visited several European countries, Japan, and the United States. They participated in discussions at SWP, at the May and November meetings of the International Federation of Accountants (IFAC) Council, at meetings of G4+1 standard setters, and at the G10 Group of professional accounting bodies. They had several meetings with the Chief Accountant of the SEC and with the EC Director General of DG XV, the EU's Directorate for Financial and Company Law. The details of their unicameral model had been developed during these meetings. They hoped
   that the SEC will support the recommended model.
   We believe that it has the main features which the SEC
   sees as essential to an acceptable international standard
   setter.... The FASB appears to have the same views as
   the SEC. (78) The SEC has threatened to encourage this
   [formation of a competing standard-setting body] if it is
   not satisfied with our proposals.... Board members will
   wish to consider the probability of formation of a competing
   body and its consequences for IASC.


Regarding the European Commission:
   The European Commission holds a different view of
   the preferred IASC structure from that of the SEC....
   Board members will wish to assess the risk of loss of
   support for IAS in Europe following adoption of the
   recommended model and, in doing so, will consider the
   significance of the fact that many European companies
   in practice can use US GAAP for their group accounts
   at present.


At this point, Michael Crooch (then US IASC Board representative for the AICPA who later succeeded James Leisenring on the FASB) began some extensive telephone diplomacy with the SEC and the SWP Chairman. A detailed compromise was put together on which the SEC was willing to issue a supportive press release. However, this meant that the IASC Board was unable to change anything of significance. Nevertheless, the Board unanimously supported the proposed structure at its November 15-19, 1999, meeting in Venice.

Anthony T. Cope, (79) FASB member and observer at the IASC Board who served on the IASC's Strategy Working Party along with Financial Accounting Foundation Trustee David Ruder, wrote in late 1999: "The FASB is pleased that the IASC Board has accepted the recommendation of its Strategy Working Party to restructure." (80) Cope had good reason to be pleased. He and Ruder had held out successfully for a small, independent international standard-setting board. They were aided by the fact that there were also a few "non-Anglo-Saxons" on the SWP who accepted what their "Anglo-Saxon" friends were proposing. The EC had been contesting the bid by the SEC to have more influence on international standard setting. However, an uncompromising EC letter convinced the SWP that it could not accept the EC's demands, and its decisions were unanimous. (81)

Cope recalled that at the IASC Board meeting (November 15-19, 1999) in Venice, where the Board approved the new structure and constitution, Michael Crooch made the presentation; there were many trans-Atlantic calls during the course of the meeting. The Executive Committee could announce at the meeting that the SEC approved, while Cope could say the FASB supported the deal. (82) At its December 1999 meeting, the IASC Board voted unanimously to appoint the members of the Nominating Committee to select the initial trustees to implement the proposed new structure. The European Commission was not represented, nor was there a Japanese member.

In a January 13, 2000, news release, (83) the Nominating Committee announced that it had had its first meeting and initiated its search and selection process for the nineteen trustees of the restructured IASC. SEC Commissioner Arthur Levitt was named chairman of the Nominating Committee. That first meeting was held in Levitt's Conference Room at the SEC. At its second meeting, held in France, the SEC indicated its interest in recruiting well-known and highly qualified people to the IASCF Trustees. Levitt agreed to recruit Paul Volcker, who subsequently agreed to chair the Trustees.

The meeting of the member bodies of IASC occurred on May 24, 2000, in Edinburgh, Scotland. Enevoldsen urged the member bodies to support the creation of the new structure. The Assembly voted unanimously in favor of the recommendation for the adoption of the new constitution. (84) The trustees established two subcommittees, one to develop plans for assured and adequate financing, and a second to oversee the process of selecting board members. (85) A June 29 press release reported that the Trustees unanimously agreed that Sir David Tweedie, UK Accounting Standards Board Chairman, should become IASB Chairman.

The trustees' nominating committee (86) held interviews for new board members in 2000, which Sir David Tweedie observed. The trustees announced the names of the new board on January 25, 2001; (87) Table 3 lists their names and characteristics. That the basis of selection of new Board members was technical expertise is clear. Eight of the fourteen members were either representatives (88) or observer members (89) of the old Board, yielding significant continuity. David Tweedie, IASB Chairman, has commented that "a key feature of the [IASB] was the number who came from a standard-setting background. The Board had to be able to punch at the same weight as the FASB and, therefore, couldn't afford to have a steep learning curve in front of it." (90)

Having generated donation commitments of more than $75 million over five years, on March 15, 2001, the Trustees announced they had activated the new constitution. FASB Chairman Jenkins, on the formal implementation of the IASB, stated, "It is a critical and welcome event in establishing an independent global standard setter to provide high-quality financial reporting standards to serve our global markets." (91)

The first three months of 2001 were taken up with efforts to wind down the old IASC and to get the new IASC Foundation and its Board up and running. In February 2001, a get-acquainted meeting for the new Board was held. Robert Herz, then part-time IASB Member and later FASB Chair, attended that meeting, and recalls that the Board Members discussed the objectives of the IASB. They agreed that the IASB's goal would be to adopt a single set of high-quality international financial reporting standards. (92)

THE FASB IASB CONVERGENCE PROGRAM

In the early days of its life, the IASB had elaborate protocols for dealing with national standards setters; the FASB was just one of many national standard setters. Over time, however, the working relationships between the two Boards evolved to the point at which, by 2007, most of the major standards projects were joint efforts of both. (93) In January 2002, IASB Chairman Tweedie indicated that he saw the IASB's two main objectives as (1) convergence of US and international standards and (2) the IASB's Improvements Project. Regarding convergence, Tweedie observed, "We must converge--not just adopt GAAP." He noted that at that point the IASB was involved in joint projects with the standard setters of the UK (Performance Reporting), the US (Business Combinations), and France (First Time Application). He also observed that, regarding the IASB's own Improvements Project, the Board was addressing IOSCO's concerns about the Core Standards. The IASB would be "ripping apart" 14 standards with the goal of arriving at a much better set of Core Standards by the end of 2002. Tweedie made it very clear that his objective was a single set of high-quality global accounting standards, at least as good as GAAP, and better whenever possible. (94) In a follow-up interview, he observed, "Convergence does not mean moving to the US standard; it means both of us [the IASB and the FASB] changing." When asked whether he thought the SEC would ever endorse the Core Standards and eliminate the reconciliation requirement, Tweedie replied:
   We are picking off the convergence issues. We have
   done all the big reconciliation issues already. So, the
   more we can move those two together over the next 2 or
   3 years, reconciliation gains irrelevance.... That, I think,
   will solve the problem for them [the SEC]. (95)


Edmund Jenkins, the FASB's fourth Chairman, succeeded Beresford on July 1, 1997. His term saw growing demands for cross-border listings, escalating competition among stock markets, financial crisis in Asia--all forces pushing the demand for international accounting standards [Martinez-Diaz 2005, pp.12-14]. Jenkins had to deal with US accounting scandals, such as Enron, (96) which induced many Americans to examine the rules-based/principles-based debate and look at IASs with new eyes [Eaton 2005, pp. 7-11].

Like his predecessor, Jenkins was an internationalist. He was FASB Chairman in 1999 when the Board issued jointly with the Financial Accounting Foundation (FAF) an important booklet, "International Accounting Standard Setting: A Vision for the Future." The report's stated objective was: "[To] discuss ... how the FASB's role may continue to evolve and how its structure and process may change over time in the context of the FASB's objective and goals for participating in the international accounting system of the future." (97) "The timing of this report, during the final deliberations in the IASC over its proposed structure, suggests ... an attempt to apply pressure to the IASC to restructure along the lines that were agreeable to FASB" [Eaton 2005, pp. 6-7].

Jenkins and the FASB paid close attention to international accounting developments and actively participated in them. Jenkins wrote the author as follows:
      The FASB's involvement and leadership in the
   G4+1's efforts to improve the IASC, the work of the
   SWP, and the final efforts to convince the IASC to
   change itself into the IASB were crucial to the success
   of those efforts. [T]here was strong support from others:
   Australia (Ken Spencer); the UK (David Tweedie);
   France (Georges Barthes), but it was Tony Cope, Mike
   Crooch and David Ruder--with Lynn Turner [SEC
   Chief Accountant] and me working behind the scenes--who
   made it happen in 2001. (98)


Jenkins's successor was Robert H. Herz, a former part-time member of the IASB and Senior Technical Partner of PricewaterhouseCoopers. Coming straight from the IASB, Herz assumed the helm of the FASB in July 2002--a time of great challenge to that standard-setting body due to the many accounting scandals of the late 1990s/early 2000s, passage of the Sarbanes-Oxley Act of 2002, SEC activism, and the establishment of the Public Companies Accounting Oversight Board (PCAOB). During Herz's chairmanship, SEC activism in international accounting issues was heightened as it interacted with the FASB and the IASB, eased reconciliation and listing requirements for IASB compliant fliers, and the like.

The FASB would experience a shift in emphasis to greater commitment to and involvement in international convergence activities under Herz's leadership. Ed Jenkins reminded the author, "[I]nternational activities at the FASB picked up in the later part of 2002 [at] the time Bob Herz became chairman of the FASB .... [T]he newly restructured IASB was then in a position for the first time to work constructively on convergence issues." Herz had a strong international interest and background; (99) gradually, he moved the FASB in the direction of closer cooperation with the IASB. On the FASB Board, Herz indicated that all six of his Board colleagues supported convergence. He noted that Board members G. Michael Crooch, Katherine A. Schipper, and Gary S. Schieneman all had experience in the international arena. And he mentioned that on the IASB Board he could not recall a member who did not support convergence. Thus, on both sides of the Atlantic people were in place to assist the rapprochement of the two Boards.

In the summer of 2002, Herz convened meetings at the FASB to develop action plans, including one on convergence which ultimately led to the Norwalk Agreement later that year. Herz and Tweedie got along very well together. Herz commented, "Maybe we are like-minded. We are both Chartered Accountants." The two men were in weekly contact by telephone, and email. Herz estimated that in 2006, as a result of their attending conferences, joint FASB/IASB meetings, and other meetings, they met each other about 15 times per year. (100)

In his August 2002 "Chairman's Notes," Herz mentioned that the FASB met with members of the IASB and representatives of the SEC's Office of the Chief Accountant to discuss undertaking a project to accelerate international convergence by seeking to eliminate some of the existing areas of difference between GAAP and IASs." (101)

Joint meetings were an effective way for the two Boards to discuss major issues and reach common views. However, such meetings required significant preparation. The Boards met twice a year: at the IASB, London, in April, and at the FASB, Norwalk, Connecticut, in October. Senior staff members met and put together a proposed agenda that was reviewed by both Boards. Chairmanship of the meeting was shared between FASB's Herz and IASB's Tweedie. (102) There were 21 members at joint meetings: seven FASB members (103) and fourteen IASB members. (104) Although the Boards were meeting together, each one voted separately on each issue. That is, a proposal was accepted only if it achieved the required majority support of each Board. (105)

On September 18, 2002, the IASB held a joint meeting with the FASB at its headquarters in Norwalk. The main purpose of the meeting was to discuss projects that the two Boards were already working on jointly or would address jointly in the future in order to increase the international comparability of financial reporting. Prior to the meeting, the staffs of both Boards developed a proposed scope for the Short-Term Convergence Project. (106) Following that meeting, on October 2, the FASB added a short-term international convergence project to its agenda. (107)

A milestone was reached when, on October 29, 2002, the two Boards issued the Norwalk Agreement. In it, they pledged their best efforts to make their existing financial reporting standards fully compatible as soon as practicable and to coordinate their work programs to ensure that compatibility was maintained through (a) aiming the short-term project at removing a variety of individual differences between GAAP and International Financial Reporting Standards (IFRSs), (b) removing other differences between GAAP and IFRSs by addressing concurrently new, discrete, substantial projects (mutual undertakings), (c) continuing progress on the joint projects they were then undertaking, and (d) encouraging their respective interpretive bodies to coordinate their activities. In addition, both Boards noted that the intended implementation of the IASB's IFRSs in several jurisdictions (the EU member countries) on or before January 1, 2005, would require that they pay attention to the timing of the effective dates of new or amended reporting requirements.

Before and after the Norwalk Agreement, the Boards developed various ways of working together to achieve their shared convergence goals. The FASB's principal cooperative efforts included (1) joint projects conducted with the IASB, (2) the short-term Convergence Project, (3) liaison IASB member on site at the FASB offices, (4) FASB monitoring of IASB projects, and (5) explicit consideration of convergence potential in all Board agenda decisions. Each is discussed briefly below.

1. Joint projects conducted with the IASB. Joint projects were those that the two standard setters had agreed to conduct simultaneously in a coordinated manner, with the objective of issuing common standards. In 2008, the FASB and IASB were conducting joint projects to address a common Conceptual Framework, Revenue Recognition, Business Combinations, (108) and Financial Statement Presentation.

2. The short-term convert. The scope of the short-term convergence project was limited to those differences between GA_AP and IFRSs in which convergence around a high-quality solution was achievable in the short-term, usually by choosing between the existing IFRS and GAAP guidance.

By 2008, progress had been made by both Boards, including: (1) the FASB issued new or amended standards that (a) introduced a fair value option (SFAS 159) and (b) adopted the IFRS approach to accounting for research and development assets acquired in a business combination (SFAS 141R); and (2) the IASB published new standards on borrowing costs (IAS 23 revised) and segment reporting (IFRS 8). With the 2006 Memorandum of Understanding the two Boards shifted their emphasis from short-term to long-term projects. That emphasis remained with the 2008 update to the 2006 MoU. (109)

3. Liaison IASB member on site at the FASB offices. James J. Leisenring, a former FASB Board member, was the IASB member to fill the role of liaison Board member to the FASB. (110) The role was created by the IASB to facilitate information exchange and increase cooperation between the FASB and the IASB. FASB Chairman Herz interfaced regularly with Leisenring, who also attended board and senior staff meetings. Herz observed that Leisenring effectively represented the IASB's views and tried not to let his own views color his representations of them. (111)

4. FASB monitoring of IASB projects. The FASB Board and staff monitor IASB projects, both to gain insights into IASB thinking on issues and to provide the IASB with FASB insights. Monitoring was principally achieved through monthly IASB update meetings led by IASB liaison member Leisenring and held the week after the IASB meeting. They provided the FASB Board and staff the opportunity to learn about IASB decisions and to provide any insights from a US standard-setting perspective. (112)

5. Explicit consideration of convergence potential in all board agenda decisions. All topics formally considered for inclusion on the FASB's agenda needed to be assessed for the possibilities for cooperation with the IASB.

At their joint meeting in April 2004, the two Boards agreed that, in principle, joint projects were the most practical means of achieving the goal of common standards. Consequently, they reached the decision that new standards in major areas should be developed through joint projects. Both considered how they should approach major projects underway by one but not the other (for example, the FASB had a project underway on liabilities and equity that the IASB was not directly involved in, and the IASB had an active project on accounting for insurance contracts). FASB Board member Ed Trott proposed a modified joint approach to those projects under which one Board would take the lead in developing a discussion paper. After considering constituent input on the paper, the project would become joint and the Boards would work together to develop common Exposure Drafts and final standards. (113)

Another milestone in the Boards' working relationship occurred in late 2004. At the FASB/IASB joint meeting in Norwalk on October 19-20, both decided to add to their agendas a joint project on a conceptual framework to be based upon and build from the existing FASB Concept Statements and the IASB Framework for the Preparation and Presentation of Financial Statements. The two Boards concluded that differences between their existing frameworks might impede development of common standards in current and future projects. (114) On July 6, 2006, they published the first draft chapters of their joint conceptual framework.

In 2005, SEC Chief Accountant Don Nicolaisen put forward a "Roadmap" for the removal of the reconciliation requirement by 2009 for non-US companies that use IFRSs and register in the US. (115) That Roadmap identified several milestones to be achieved before the SEC staff would recommend removal of the reconciliation requirement. One of those milestones was progress by the IASB and FASB on their convergence work programs.

Also in 2005, the SEC adopted an accommodation to permit foreign private issuers that were first-time adopters of IFRS, for the first year of reporting under IFRS, to file two years instead of three years of IFRS financial statements in their SEC filings. (116) (IAS 1, [paragraph] 38 requires two years of comparative data.)

Following the issuance of the Roadmap, the FASB and IASB decided to develop and issue a document on the scope of their joint work program and the progress expected to be achieved by 2008. Representatives of both organizations consulted representatives of the European Commission and the staff of the SEC, with the Boards' respective advisory councils and other interested parties. (117) On February 27, 2006, the FASB and IASB issued a Memorandum of Understanding (MOU), "A Roadmap for Convergence between IFRSs and GAAP--2006-08" to communicate their convergence work program. (118)

In developing the MoU, the two Boards agreed on the following principles:

* Convergence of accounting standards can best be achieved through the development of high-quality, common standards over time.

* A new common standard should be developed that improves the financial information reported rather than trying to eliminate differences between two standards in need of significant improvement.

* Serving the needs of investors means replacing weaker standards with stronger standards.

On February 27, 2006, the SEC welcomed the FASB/IASB MoU. SEC Chairman Christopher Cox, who had for weeks publicly stressed the SEC's commitment to the "roadmap" said, "The SEC is working diligently toward the goal of eliminating the existing IFRS to GAAP reconciliation requirement. Achieving that goal depends on the contributions of many parties, including US and international standard setters. This important step by IASB and FASB will help ensure that investor protection remains paramount in these efforts." (119)

A key issue at the April 2008 joint meeting of the two Boards was updating the 2006 MoU. (120) On September 11, the Boards issued a joint progress report (121) which noted that, at their joint April meeting, they confirmed their commitment to developing common, high-quality standards and agreed on a pathway to completing the MoU projects by 2011.

On June 20, 2007, in a move that the IASB had been hoping for and expecting, (122) the SEC approved for public comment a proposed rule to accept foreign private issuers' financial statements prepared according to the English language version of IFRS as published by the IASB without requiring reconciliation to GAAP. (123)

On November 2, 2007, in a two-part letter addressed to Ms. Nancy M. Morris, Securities and Exchange Commission, FAF Chairman Robert E. Denham and FASB Chairman Robert H. Herz wrote, "Board members and trustees strongly support the proposal ... that US public companies transition to an improved version of international accounting standards" (italics added). The main points were: (1) investors would be better served if all US companies used accounting standards issued by a single global financial reporting standard setter; permitting extended periods of choice between GAAP and IFRS would result in a two-GAAP system that would create unnecessary complexity for users of financial statements; (2) the FAF, FASB, SEC, and other affected parties should work together to develop a "blueprint" for transitioning US companies to IFRS--an '"improve-and-adopt' process"; and (3) the SEC should seek international cooperation to identify and implement changes necessary to sustain the IASB and to secure it as the independent global body that promulgates high-quality international accounting standards. Stable and sustainable funding was required, including staffing mechanisms for the IASB, as well as agreements to end the jurisdictional review and endorsement processes that require endorsement of each IFRS after the IASB issues it. (124)

On December 21, 2007, the SEC released a final rule permitting such foreign private issuers to file their financial statements without reconciliation so long as they complied with IFRS issued by the IASB. (125) The SEC allowed IFRS-compliant interim financial statements, and extended indefinitely the two-year accommodation. (126)

Even before the SEC issued the final without-reconciliation rule for foreign private issuers employing IFRS, in light of the ongoing FASB/IASB convergence activities and the movement outside the US toward acceptance of IFRS financial statements, the Commission issued a concept release (127) on allowing US issuers to prepare IFRS-compliant financial statements as a basis of financial reporting. (128)

On August 27, 2008, the SEC issued a press report that the Commission had voted to issue a proposed roadmap that could lead to the use of IFRS instead of GAAP by US issuers beginning in 2014. The proposed multi-year plan would establish a number of milestones that, if achieved, could lead to the use of IFRS by US issuers in their SEC filings. After reviewing the status of the proposed milestones, the Commission would decide in 2011 whether adoption of IFRS was in the public interest and would benefit investors. Chairman Cox said, "The increasing worldwide acceptance of financial reporting using IFRS, and US investors' increasing ownership of securities issued by foreign companies that report financial information using IFRS, have led the Commission to propose this cautious and careful plan. (129)

Although the New York Stock Exchange had reached a high of over 14,000 in October 2007, by September 2008 a worldwide credit and liquidity crisis had engulfed capital markets and raised questions about the application of fair value reporting in inactive markets. In the midst of these developments, the fair value controversy heated up to such an extent that the SEC Office of the Chief Accountant and the staff of the FASB felt compelled to issue a clarifying press release on September 30, 2008. (130) Based on the fair value measurement guidance in FAS No. 157, Fair Value Measurements, the SEC and FASB staffs intended their joint clarifications to help preparers, auditors, and investors address the urgent fair value measurement questions in the depressed economic environment. (131) Within days, the IASB staff concluded that the SEC-FASB clarification was "not an amendment to FAS 157 ... but rather provides additional guidance for determining fair value in inactive markets ... and considers it consistent with IAS 39, Financial Instruments: Recognition and Measurement." (132) In order to converge its standards with the FASB's, the IASB short-cut its own due process. It issued an amendment to permit reclassifications of financial assets under certain circumstances (October 13); proposed enhanced disclosures of financial instruments (October 15); and published guidance for the application of fair value in illiquid markets (October 31). (133)

The worldwide recession of 2008 did not dissuade the SEC from moving ahead with the issuance of its Roadmap for the potential use of IFRS financial statements bN US issuers. On November 14, 2008, the SEC posted the proposed Roadmap on its website (sec.gov). It set forth seven milestones, including the implementation of the mandatory staged use of IFRS by US issuers. (134)

The SEC proposed to amend its rules to permit a limited number of US companies (estimated to be 110 in 37 IFRS industries) to voluntarily use IFRS for their annual reports, beginning with filings in 2010. In the event the SEC ultimately decided not to issue a rule requiring all US listed companies to use IFRS, these companies would be required to return to the use of GA_AR Nevertheless, by the end of 2008 a sea change had occurred in US financial reporting regulation, with the SEC permitting foreign private issuers to report according to IFRS without reconciliation to GAAP, and with the possibility that the SEC would soon require US listed companies to gradually shift to the use of IFRS.

In addition, the working relationship between the FASB and the IASB in 2008 was different than it was in the early days (2001), when each board had its own projects and there were few joint projects. By 2008, staff members were crisscrossing the Atlantic as they worked together on several joint projects. The Boards' respective agendas were quite similar and both had regularly scheduled joint meetings. (135)

The year 2008 ended with the world deep in recession. On December 30, the FASB and the IASB announced the membership of the Financial Crisis Advisory Group (FCAG), which they had established to consider financial reporting issues arising from the global financial crisis. The two Boards would jointly consider any FCAG recommendations; any decisions by them would "be subject to appropriate and thorough due process." Thus, the global economic recession had driven the Boards to even closer cooperation as they struggled individually and together to respond quickly to the accounting issues that had arisen from the crisis. In the USA, a new president, Barack H. Obama, was elected. In January 2009, he would replace George W. Bush. A new wind would blow across the US capital. In December 2008, the implications for convergence remained to be seen.

SUMMARY AND PROSPECT

The US Financial Accounting Standards Board and the International Accounting Standards Committee were formally established in 1973. In the early years, these two NGOs tended to operate more or less in their own spheres. Over time, the relationship between them evolved from distant to IASC Board observer, from occasional partner to full partner holding regular joint meetings with the IASB. (136) By 2008, virtually all of the FASB's major projects were being developed in partnership with the IASB, whose standards had achieved wide acceptance. By 2008, 113 countries had either required IFRS, intended to require IFRS, or permitted their use. (137)

As the two groups grew closer together, the role of FASB's overseer, the SEC, became more and more pronounced. Since adoption of IAS/IFRS by the US has been a major objective of the IASC(B), the SEC, which has the legal responsibility for accounting standards in the US, was bound to take a significant role in the developments. (138) It was a major player in the IASC's restructuring efforts in 1998-2000; and it had a pronounced impact on the subsequent convergence efforts of the IASB and FASB. It even drafted the "roadmap" for acceptance of IFRS statements without reconciliation to GAAP, which, following its publication, further influenced the convergence efforts of both Boards.

In the beginning, the FASB was charged with the formulation of high-quality financial accounting and reporting standards for the US capital markets; the SEC recognized the FASB's standards as "authoritative" and "generally accepted" for purposes of US federal securities laws. The IASC saw its mission as the establishment of high-quality international accounting standards that could be used for world capital markets. Its efforts were not overseen (139) nor subject to approval of a single regulator. (140) In the early years, the FASB's standards were often regarded by others as well as by itself as the finest in the world. On the other hand, the IASC often felt it necessary to defend itself against the charge that, since it allowed a number of alternative accounting treatments, its standards were the lowest common denominator.

The standards orientations of these two important NGOs have often been perceived as decidedly different. The US FASB has been accused of promulgating high-quality, extremely detailed, complicated rules-based standards. The IASC/IASB has prided itself on its inclination to issue principle-based standards that, over time, have been enhanced as a result of various improvement projects to become high-quality standards. With the accounting scandals in the US in the late 1990s and early 2000s, the US Congress charged the SEC to study the appropriateness of principles-based standards for the US. Moreover, the FASB conducted a study of the appropriateness of such standards. Under the Chairmanship of Robert H. Herz, the FASB embarked on a three-pronged approach to standard setting: improvement, simplification, and convergence. Improvement involved bettering the accounting literature, leading to the FASB's Codification Project. Simplification involved not only having the FASB as the single standard setter, but also codification of the existing US accounting standards and relevant SEC guidance, and trying to improve the understandability of new accounting standards issued by the FASB. Convergence was launched with the Norwalk Agreement of 2002. (141)

Over time, the goals of these two NGOs converged. The FASB expanded its mission to encompass high-quality financial accounting standards for the US and working toward the goal of common standards for the world's capital markets. In addition, both the FASB and the IASC (later IASB) saw the need to converge their respective standards in order that a worldwide set of Generally Accepted Accounting Principles could evolve. By 2008, each organization was involved intimately with the other in a multiyear effort to that end. While the goal of their convergence efforts was common standards, they sometimes fell short of that objective. At times, those differences resulted from factors unique to one jurisdiction or another that would take time to resolve. For example, when the IASB revised its inventory standard, it eliminated the last-in first-out (LIFO) method of inventory valuation. In 2008, LIFO was still an accepted US inventory valuation method that seemed unlikely to go away any time soon due to the LIFO conformity rule of the US Internal Revenue Service, which required use of LIFO for financial reporting purposes when used for tax reporting. (142) Thus, while convergence was indeed occurring, differences persisted.

The efforts of the IASB since 2001 had been sufficiently successful that they had convinced both their supporters and their critics, including the SEC, that International Accounting Standards/International Financial Reporting Standards (IAS/IFRS) had become a set of high-quality accounting standards suitable for use by global companies to list on US exchanges without reconciliation to GAAR The SEC even went so far as to issue a Concept Release in 2007 to investigate whether US-based issuers should be permitted to file and report using IAS/IFRS instead of GAAP financial statements for listing on US capital markets, and to propose, in 2008, a roadmap for achieving their adoption by US firms. Still, in 2008, there existed the simultaneous use of both sets of standards in the US. However, SEC actions in 2007 and 2008 had affirmed the prescient observation of former IASC Chairman Arthur Wyatt that "the ultimate resolution of the standard-setting dilemma internationally...will lie in the hands of the regulators ..." (see above.) This certainly had proven to be the case in the US.

Once the FASB and the IASB gradually bring their convergence efforts to completion over the next number of years, what lies ahead? Will the simultaneous use of the two sets of standards, GAAP and IFRS, continue into the long future? (This seems less likely for listed companies, with the August 2008 SEC proposal to permit US issuers to use IFRS.) Will the IASB continue to promulgate high-quality standards now that the original members have retired from the Board? If the world's capital markets perceive a decline in the quality of IFRSs in the future, will the FASB become the de facto international standard setter, assuming that GAAP retains its reputation for high quality and that international opposition to American GAAP ceases?

Will the FASB continue to exist if US-based listed companies switch, either voluntarily or involuntarily, to wholesale use of IFRSs? (143) Will there continue to be a need for a US national accounting standard setter, perhaps smaller in size, to serve the needs of non-public companies that might choose to continue to use GAAP? Will the FASB continue to provide advice to the

IASB?

What will be the role of the SEC in a world of harmonized financial accounting standards for filing, reporting, and listing on US exchanges? What role will the US Congress perceive to be the proper one for the SEC in a world of converged financial reporting standards?

Whatever answers to these questions emerge, it is clear that interesting times are likely to lie ahead for FASB and IASB standard setters as they wrestle with present and future financial accounting standard setting and reporting challenges.

EPILOG

Since December 31, 2008, there have been a number of personnel changes. For example, the Obama Administration named Mary Shapiro Chairman of the SEC. During the fourth year of his second five-year term, Robert Herz, FASB Chairman, resigned, effective September 30, 2010; he was succeeded by Leslie Seidman. Sir David Tweedie, IASB Chairman, completed his second five-year term on June 30, 2011; he was succeeded by Hans Hoogervorst.

The FASB/IASB International Convergence Project has continued, although progress has not been as rapid as originally hoped. Following their joint meeting in London on April 11-14, 2011, the two Boards reported on the progress of their joint convergence work. Since their earlier November 2010 report, the IASB and the FASB have:

1. Completed five projects: The Boards have reached important decisions on a number of projects and reduced the number of remaining priority MoU projects to three (revenue recognition, leasing, and financial instruments). Publication of standards that are converged or substantially converged on fair value measurement, consolidated financial statements (including disclosure of interests in other entities), joint arrangements, other comprehensive income, and post-employment benefits were expected in 2011.

2. Given priority to the remaining MoU areas and insurance accounting: In November 2010, the Boards decided, in order to achieve timely completion, to give priority to their joint work on three MoU projects--financial instruments, revenue recognition and leases--and on accounting for insurance contracts.

3. Extended the completion target beyond June 2011: At their meeting in April 2011, the Boards extended the timetable for the remaining priority MoU convergence projects and for insurance beyond June 2011. The Boards revised their work plan to focus on completing the three remaining priority convergence projects in the second half of 2011. For insurance contracts, the IASB planned to complete its project by the end of 2011, while the FASB planned to issue an exposure draft in a similar timeframe.

With the progress made since November 2010, the Boards neared the completion of their MoU program, which began in 2002. The short-term projects identified for action in their 2006 MoU and updated 2008 MoU have been completed or come close to completion.

Of the longer-term projects, only three of the priority convergence projects remain for which the Boards have yet to finalize the technical decisions: financial instruments, revenue recognition, and leasing.

In 2008, the Boards set the target date of June 30, 2011, to finalize the MoU projects. At their meeting in April 2011, they agreed that they would spend additional time beyond June to complete this joint work. They were committed to completing the work in the remaining MoU areas during the second half of 2011. This objective was consistent with the recommendations of G20 made at their 2009 Pittsburgh Summit. (144)

In the belief that it was necessary to specify the work required to incorporate IFRS into the US financial reporting system for US issuers, including the scope, timeframe, and methodology for any such transition, in February 2010 the SEC directed the staff of the Office of the Chief Accountant to develop and carry out a Work Plan. This Work Plan was to set forth specific areas and factors to consider before potentially transitioning the current financial reporting system for US issuers to a system incorporating IFRS. Assuming that the Commission determined in 2011 to incorporate IFRS into the US domestic reporting system, the SEC concluded that the first time US issuers would report under such a system would be approximately 2015 or 2016. (145)

Acknowledgements: The author would like to thank Prof. Dr. Klaus Henselmann, Lehrstuhl fur Rechnungswesen und Prufungswesen, Betriebswirtschaftliches Institut, Friedrich-Alexander Universitat, Erlangen-Nurnberg, Germany; Prof. Chris Nobes, Fellow ACCA, Professor of Accounting, School of Management, Royal Holloway University of London, UK; Mr. Kurt Ramin, Commercial Director (retired), International Accounting Standards Committee Foundation, London, UK; Prof. Stephen Zeff, Professor of Accounting, Jones Graduate School of Business, Rice University, Houston, TX, USA; Dick Fleischman and Gloria Vollmers, AHJ editors, and three anonymous reviewers for their comments on earlier versions of this paper. The usual disclaimer applies.

REFERENCES

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Bricker, R. J., and Previts, G. J., eds. (2002), The Murphy-Kirk-Beresford Correspondence 1982-1996: Commentary on the Development of Financial Accounting Standards. Studies in the Development of Accounting Thought. Vol. 5, Amsterdam: JAI.

Cairns, D. H. (1999), Applying International Accounting Standards. 2nd ed. London: Butterworths.

Camfferman, K., and Zeff, S. A. (2007), Financial Reporting and Global Capital Markets. Oxford: Oxford University Press.

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International Accounting Standards Committee (1999), Comment Letters on Discussion Paper Shaping IASC for the Future. London: August 1999.

Kirsch,, R. J. (2006), The International Accounting Standards Committee: A Political History. London: CCH/WoltersKluwer.

Martinez-Diaz, L. (2005), "Strategic Experts and Improvising Regulators: Explaining the IASC's Rise to Global Influence, 1973-2001," Business and Politics, Vol. 7, No. 3, article 3.

McGregor, W. (1999). "An Insider's View of the Current State and Future Direction of International Accounting Standard Setting," Accounting Horizons, Vol. 13, No. 2, 159-168.

Miller, E B. W., Redding, R., and Bahnson, E R. (1994), The FASB: The People, the Process, and the Politics. 3rd ed. Burr Ridge, IL: Irwin.

Northwestern Journal of International Law & Business. Spring 2005. Vol. 25, No. 1.

Street, D. L. (2005), Inside G4+ I: The Working Group's Role in the Evolution of the International Accounting Standard Setting Process. London: The Institute of Chartered Accountants in England and Wales.

Teegen, H., Doh, J. E, and Vachani, S. (2004), "The Importance of nongovernmental Organizations (NGOs) in Global Governance and Value Creation: An International Business Research Agenda," Journal of International Business Studies, Vol. 35, 463-483.

World Accounting Report (WAR), various issues.

(1) On July 1, 2010, the IASC Foundation changed its name to the International Financial Reporting Standards Foundation. This paper employs the historically accurate names for the periods covered.

(2) "'There is an important contrast between the IASC and the FASB. The IASC was set up by the accounting institutes (certain people in particular) who believed that the accountancy profession should set accounting standards. The US had gone through that experience and had moved on to the idea of an independent standard setter. So the two bodies were constituted differently and so may have approached standard setting and standards on particular topics in different ways." David Cairns, emails to the author, September 11, and December 15, 2011.

(3) See "Statement of Policy on the Establishment and Improvement of Accounting Principles and Standards," Accounting Series Release No. 150, December 20, 1973, and "Policy Statement Reaffirming the Status of the FASB as a Designated Private-Sector Standard Setter;" Securities Act Release No. 33-8221, April 23, 2003, available at www.sec/gov/rules/policy/33-8221.htm.

(4) Edmund L. Jenkins, letter to author; September 14, 2008.

(5) "The IASC was not independent of the accountancy bodies although it did have the power to set its own standards without the approval of those bodies but, of course, the bodies appointed the people who voted. The IASB has always been independent of the accountancy bodies. The IASB/IASCF structure was very much modelled on the then FASB/FAF structure--thanks to SEC pressure which you mention later--so, the IASB was and is as independent as the FASB--but, of course, the IASC did not derive its authority from any particular jurisdiction"; and "As you explain, both the IASB and FASB are susceptible to pressure/lobbying from various sources--and both may find that those who give authority do not accept what they do. In other words, the SEC has not accepted some FASB requirements or proposals and specific jurisdictions have not accepted IASB requirements. Similarly, the US Congress has objected to some FASB requirements/ proposals and the equivalent bodies in other jurisdictions have objected to some IASB requirements/proposals. The only difference between the FASB and the IASB is that the FASB is dealing with one jurisdiction whereas the IASB is dealing with multiple jurisdcitions which have varying traditions." (David Cairns, emails to author, October 27, 2008, and September 15, 2011)

(6) IASC Archive File, FASB.

(7) Hans Burggraaff, email to author, September 8, 2008.

(8) David Cairns, email to author, October 27, 2008.

(9) Hans Burggraaff, email to author, September 8, 2008.

(10) Kirsch (1996), pp. 157-158.

(11) In March 1979, the FASB appointed a 14-member task force to advise the Board with respect to its project to reconsider Statement No. 8, "Accounting for the Translation of Foreign Currency Transactions and Foreign Currency Financial Statements." FASB Status Report, No. 83, March 15, 1979, p. 1.

(12) David Cairns, email to author, October 27, 2008. "Allan Cook ... was the only IASC secretary to come from a large multinational company and had a particular interest in foreign currency translation. My understanding is that he played a major part in obtaining the resolution of the issue, in particular the approach taken in FAS 52."

(13) In December 1981, the FASB Status Report announced that Statement No. 52, a new foreign currency translation standard, replaced Statement No. 8. The Board acknowledged the assistance it received from the fourteen-member Advisory Task Force, as well as observers representing the IASC, the UK and Ireland Accounting Standards Committee, and the Canadian Institute of Chartered Accountants.

(14) David Cairns, email to author, October 27, 2008. "While [the IASC] knew that the technical contribution of the FASB and the European Commission would be different, it had to involve them both for political reasons. This proved to be true when, eventually, the FASB and the European Commission later attended board meetings. The FASB often had substantive technical comments to make. The European Commission's comments tended to be limited to the text (or the interpretation of the text) of the Fourth and Seventh Directives."

(15) Hans Burggraaff, email to the author, September 8, 2008.

(16) IASC Archive File. FASB. Ultimately, the FASB and the 1ASC did cooperate on the development of their respective Income Tax Standards.

(17) IASC Board Meeting Minutes, London, June 23-26, 1981.

(18) David Cairns, email to author, October 27, 2008. "Both Stephen Elliott and John Kirkpatrick devoted a considerable amount of effort to persuading companies who traded internationally or whose securities traded internationally to state that their financial statements complied with IAS (as well as appropriate national standards). Elliott had announced this policy at the 1982 World Congress. Kirkpatrick (who was my first chairman) pushed this policy in every speech. It is not an easy policy to persuade national standard setting bodies to accept. It is doubtful that the FASB would have had any reason to support such a policy."

(19) In 1981, the IASC established the Consultative Group of outside experts. The Group met twice a year with the IASC Board and provided input on the IASC's technical agenda, its work program, and its broader strategy. David Cairns has indicated that some Consultative Group members participated on IASC Steering Committees (Kitsch, 2006, p. 112).

(20) David Cairns, email to author, October 27, 2008. "There were some in the IASC that felt the same way. Others did not feel that way ... because they believed the profession should control standard setting. The [following] response from Don Kirk places emphasis on the needs of users in financial statements in capital markets. The USA is, possibly, unique in that many entities are not required to file financial statements with some regulatory authority. Therefore, the FASB has concentrated on those companies that raise capital on US public markets. In contrast, the IASC developed accounting standards that had to apply to all companies (public and private). As the IASC shifted its focus to companies on international capital markets in the early 1990s, the co-operation between the IASC and the FASB increased."

(21) For the texts of Walters's remarks and Kirk's response, see FASB Status Report, No. 154, March 12, 1984, pp. 5-8. Support for Walters's observation is evident by the absence of mention of the IASC or IAS in the paper Donald Kirk presented to the Arthur Young Professors Roundtable in May 1983. See: "The FASB After Ten Years: An Inside View: A Paper by Donald J. Kirk, Chairman, Financial Accounting Standards Board," in Bricker and Previts, 2002, pp. 9-27.

(22) See: WAR, March 1982, October 1982, and December 1983.

(23) See: WAR, September 1979, June 1983, and October 1984.

(24) Mainly the Fourth and Seventh Directives, which govern the contents of published financial statements.

(25) Georges Barthes de Ruyter, email to author, September 2, 2008. David Cairns, emails to author, September 11, and December 15, 2011, indicated that US and UK board members were likewise quite conscious of the assymetry of means and reputation between the FASB and the IASC at that time, but that all US and UK members "did not necessarily support inviting the FASB and the EC."

(26) WAR, January 1987.

(27) David Cairns, email to author, October 27, 2008.

(28) Email to author, September 13, 2008.

(29) David Cairns, emails to author, October 27, 2008, and December 15, 2011. "The IASC made a nomination (Derek Bonham, the CFO of Hanson). I recall it being quite a difficult process to find somebody both suitable and available to participate in the US process."

(30) Remarks made to the IASC Board during its Toronto meeting, June 22-24, 1988, WAR, October 1988, p. 8. Venue confirmed by David Cairns, email to author, September 11, 2011.

(31) "FASB Viewpoints: Internationalization of Accounting Standards: The Role of the Financial Accounting Standards Board," No. 195, pp. 3-6.

(32) IASC Archive File, FASB.

(33) IASC Archive File, FASB.

(34) Meetings at the FASB, Norwalk, Connecticut, July 18, 1989.

(35) David Cairns, email to author, September 11, 2011. "It was 'in conjunction with' only in the sense that I and (probably) Georges Barthes were in New York for that meeting. In the same way that the FASB had cost constraints, the IASC also had budget constraints. As the relationship developed, the IASC made specific visits to the FASB unrelated to other commitments in the US."

(36) IASC Archive File, FASB.

(37) IASC Archive File, FASB.

(38) David Cairns, email to author, October 27, 2008.

(39) Notes of a meeting at the FASB, Norwalk, 12th March 1991, on the FASB's draft Strategic Plan for involvement in International Activities. IASC Archive File. FASB.

(40) David Cairns, email to author, October 27, 2008.

(41) Drafts of the FASB plan were discussed with the IASC, the FASAC, the technical partners of the Big Six accounting firms, representatives of the SEC, and the AICPA.

(42) "FASB's Plan for International Activities," No. 223, August 31, 1991, pp. 6-8.

(43) Status Report, No. 232, pp. 6-10.

(44) David Cairns, email to author, October 27, 2008: "It was this meeting which, to all effects, led to the creation orG4. Around this time, the FASB and the IASB also decided to co-operate on earnings per share. The IASC had already made significant progress and the FASB began the project on the basis that it would conform GAAP with the IASC's thinking, as the FASB made clear in its project proposal"

(45) "FASB Hosts Meeting of World Standard Setters," FASB Status Report, No. 237, November 30, 1992, pp. 2-3; for an interesting summary of the divisions evident at the meeting, see K. Atchley, 1992, pp. 154-155.

(46) David Cairns, email to author, September 11, 2011. "This is a view (perhaps a myth) which seems to have grown up during the last few years. At the time the revised IAS 14 was approved the message was that it was close to FAS 131." (See the history of IAS 14 in Cairns, 1999, pp. 741-744).

(47) "Notes from the Chairman," FASB Status Report, No. 259, p. 2.; and "Highlights of Financial Reporting Issues: FASB's Plan for International Activities," FASB Status Report, No. 262, pp. 6-10.

(48) Excerpted from Kirsch, 2006, various chapters, updated with further research.

(49) David Cairns, email to author, September 11, 2011. "There were a lot of

IOSCO people who agreed with what ES [Eiichi Shiratori] said--the problem was the SEC both from the perspective of the IASC and other members of IOSCO."

(50) David Cairns, email to author, October 27, 2008. "Following the July 1995 agreement [between the IASC and the IOSCO Technical Committee], there were some very strong criticisms by the FASB about the IASC's approach to completion of core standards."

(51) "Put at its most basic, the new end game involves IASC moving its standards near enough to US GAAP to be acceptable to the SEC as providing equivalent transparency and thereby shareholder protection, while at the same time staying far enough away from GAAP to win the support of the rest of the world." WAR, August/September 1995, p. 1.

(52) IASC Archive File. Chairman, Secretary-General Correspondence.

(53) In late 1996, Beresford noted that the SEC might consider IASC standards for use without reconciliation to GAAP by foreign companies in US capital markets as early as 1998. Beresford commented: "Using IASC standards without

reconciliation to US GAAP would shift the burden to US investors attempting to compare investment opportunities among foreign and domestic companies competing for capital on the same market. The FASB's comparison Report can help those investors sort out the differences," in FASB Status Report, No. 168C, December 23, 1996, p. 1.

(54) As early as September 2, 1998, Paul Leder (SEC and IOSCO Working Party No. 1 Chairman) and Mary Tokar (SEC) briefed Sir Bryan Carsberg in London. On September 28, 1998, Carsberg wrote a memorandum to the Executive Committee members to outline their proposals: "... SEC would start its processes in the United States by issuing a "Concepts Release" [sic] before taking a position on endorsement in IOSCO fora. Publication of the Concepts Release would show continuing momentum and determination to move ahead with decisions.... then, if things were still looking positive, a detailed rulemaking proposal in the United States to meet the formal requirements for moving to accept our Standards for cross-border listings."

(55) The 48 comment letters that were filed electronically are available at www.sec.gov/rules/s70400.htm; hard copies of all comment letters are available in the SEC's Public Reference Room, File No. S7-04-00. For IASC's analysis of the comment letters, see: "Mixed Views on IASC Standards," IASC Insight, June 2000, pp. 12-13.

(56) Excerpted from Kirsch, Chapter 8, and updated with further research.

(57) Street [2005, pp. 10 and 13-14] indicated that G4 was not intended to be an "Anglo-American club." All countries with an accounting standard-setting body were extended an invitation to join. However, only the G4 standard setters self-selected. Street cites Jim Leisenring's explanation that this was due to their interest in international financial reporting and their desire to solve accounting problems using the IASC Framework's concepts. Street reported that Herman Marseille of NIvRA, the Dutch standard setter, attended one G4+ I meeting, but NIvRA decided not to join due primarily to resource constraints and the fact that its Board members were part-time.

(58) David Cairns, email to the author, September 11, 2011.

(59) Executive Committee, January 30, 1996.

(60) Paris, October 29, 1997.

(61) Niagara-on-the-Lake, Canada, July 5, 1998.

(62) Zurich, November 8, 1998, Washington D.C., March 15, 1999, and Venice, November 14, 1999.

(63) Executive Committee, Copenhagen on June 18, 2000.

(64) David Cairns, email to author, September 11, 2011. "[O]nly the covers ... were different--the same happened in each G4 country."

(65) Michael Sharpe, email to author, March 22, 2004. At its 2001meeting in London, given the imminent commencement of the IASB, the G4+1 decided to disband and cancel its future activities. G4+1 COMMUNIQUE, Number 10, January 2001.

(66) Excerpted from Kirsch [2006, Chapter 10], and updated with further research.

(67) Plans for 1ASC, Advisory Council Papers--July 1995, Agenda Paper IV.

(68) Executive Committee Papers--June 1996, Agenda Paper X.

(69) Executive Committee and Advisory Council, Frankfurt, June 9, 1996.

(70) Dennis R. Beresford, "Outline: World Standards Setters." Beresford sent the outline of his remarks to the 1996 World Standard Setters meeting to the author with a letter dated August 11, 2008. See also: Jim Kelly, "IASC/IOSCO--A Hand on the Brake," WAR, April 1997, p. 2.

(71) Exerpted from Kirsch [2006, Chapter 10], and updated with further research.

(72) Strategy Working Party. Executive Committee Papers, Agenda Paper VI.

(73) Sir Bryan Carsberg, interview, August 2001.

(74) Michael Sharpe, email to author, July 1, 2004.

(75) G. Michael Croche, interview, March 19, 2007.

(76) Edmond Jenkins, letter to author, September 14, 2008..

(77) Sir David Tweedie, IASB Chairman, and former Strategy Working Party member, interviews, January 9 and 15, January 2002. Confirmed by G. Michael Crooch, former IASC Executive Committee member; who noted that Enevoldsen and Carsberg had independent views. Because both wanted high-quality international accounting standards, and they disagreed about the appropriate organizational model; this was a difficult time for both of them. Interview of Crooch, March 19, 2007.

(78) Stig Enevoldsen, interview, June 20, 2003, indicated that the G4 put tremendous pressure on Carsberg and him, reminding them that they could create their own standard setter. Also, the FASB put tremendous pressure on the IASC, threatening to become the international standard setter. However, Enevoldsen observed, "The IASC had the brand."

(79) IASC Chairman Michael Sharpe invited Anthony Cope to serve on the Strategy Working Party. Cope, a non-accountant, felt that he represented users of accounts and the interests of the global capital markets rather than the FASB specifically. He saw himself as a strong voice for a small, independent board. Interview, September 9, 2007.

(80) "FASB Supports Proposed New Structure for IASC Board," FASB Status Report, No. 204C, December 17, 1999, pp. 2-3.

(81) Georges Barthes de Ruyter, email to author, September 2, 2008.

(82) Anthony Cope, September 9, 2007. Michael Crooch, interview, March 19, 2007, reported that IASC Chairman Tom Jones had asked him to make the presentation; at the time, Crooch wondered whether it was a good idea for an American to make the presentation since some Board members were concerned with the amount of US influence. Former SEC Chief Accountant Lynn Turner confirmed these details, telephone interview, April 9, 2009.

(83) IASC Electronic Archives.

(84) Minutes of the Ordinary Meeting of the Assembly of Member Bodies of the International Accounting Standards Committee, May 24, 2000, Edinburgh.

(85) Press Release: Shaping IASC for the Future: First Meeting of IASC Trustees and Appointment of New 1ASC Board Chair, June 29, 2000. IASC electronic archives.

(86) Chaired by Ken Spencer, trustee and Australian representative on the old Board.

(87) Press Release: IASC Trustees Announce New Standard-setting Board to Reach Goal of Global Accounting Standards.

(88) Jones, Gelard, McGregor, Schmidt, Tweedie, Yamada.

(89) Cope, Leisenring.

(90) Email to author, August 14, 2008.

(91) "FASB Supports IASB's Efforts," FASB Status Report, No. 217B, February 28, 2001, pp. 1 and 3.

(92) Interview, March 19, 2007.

(93) Sue Bielstein, FASB Director of Major Projects and Technical Activities, interview, March 19, 2007.

(94) Interview, January 9, 2002.

(95) Interview, January 15, 2002.

(96) Tweedie noted to the author that Enron had not hurt the IASB. It had actually made people in the US more receptive to international accounting standards. Interview, January 15, 2002.

(97) Introduction, p. vii.

(98) Letter to author, September 14, 2008.

(99) Herz spent his teenage years in Argentina, studied and worked in the UK where he became a Chartered Accountant, and worked on PricewaterhouseCoopers' Global and US boards. Interview, March 19, 2007.

(100) Interview, March 19, 2007.

(101) Financial Accounting Series No. 235: The FASB Report, August 30, 2002, p. 2.

(102) Robert Herz, interview, March 19, 2007.

(103) As of July 1, 2008, FASB had only five members. The voting requirements were 3-2, a simple majority. The FASB Chair had decision-making authority to set the FASB's technical agenda. The FAF observed that the Chair's technical agenda setting authority would give the FASB "the ability to initiate and more quickly respond to pressing issues.... This has the added benefit of further facilitating and improving the interface with the International Accounting Standards Board (IASB)." See Financial Accounting Foundation, "Request for Comments on Proposed Changes to Oversight, Structure, and Operations of the FAF, FASB, and GASB," December 18, 2007, pp. 4-5.

(104) The IASCF Trustees, in their second five-yearly constitutional review, proposed expanding the size of the IASB to 16 members effective January 1, 2010. While the IASCF Trustees believed that the Constitution's "emphasis on 'professional competence and practical experience' should remain paramount," their Proposal for Change made explicit a geographical component to Board membership with (a) four from Asia/Oceania; (b) four from Europe; (c) four from North America; (d) one from Africa; (e) one from South America; and (f) two appointed from any area, subject to maintaining overall geographical balance. With the growing number of countries adopting IFRSs, the Trustees determined to amend the Constitution with respect to the Board's size and geographical diversity. Thus, paradoxically, the Trustees returned to the geographical representation idea of the Strategy Working Party's bicameral model. On January 29, 2009, the Trustees issued a press release to announce amendments to the IASCF Constitution to: establish a link to a Monitoring Board of public authorities; expand the IASB from 14 to 16 members by 2012 while ensuring geographical diversity; enhance liaison with investor groups; directly address G20 recommendations; and provide free core standards through its public website.

(105) J. Michael Crooch, interview, March 19, 2007.

(106) "FASB-IASB Joint Meeting Supports Convergence," Financial Accounting Series No. 236: The FASB Report, September 30, 2002, p. 1. Bielstein, interview, March 19, 2007.

(107) The next day, the Wall Street Journal reported: "The board that sets US accounting standards formally approved a project to study potential areas of convergence between US and international accounting rules." "FASB Backs Project To Study Unification Of Accounting Rules," October 3, 2002, p. C9.

(108) Business Combinations, Part II, was completed with the issuance of FAS 141R (revised in 2007) and a revised IFRS 3 (issued in January. 2008).

(109) Sue Bielstein, interview, January 23, 2009.

(110) Leisenring was the only IASB liaison Board member to the FASB. This formal liaison role was eliminated when his term as an IASB member ended, presumably because the Boards' close working relationship and frequent joint meeting schedule eliminated the need for it. Sue Bielstein, email to author, November 16, 2011.

(111) Robert Herz, interview, March 19, 2007.

(112) Sue Bielstein, interview, March 19, 2007.

(113) Sue Bielstein, interview, March 19, 2007, and "FASB and IASB Discuss Plans for the Future," Financial Accounting Series No. 256: The FASB Report, May 28, 2004, pp. 1 and 6.

(114) The FASB Report. November 30, 2004.

(115) For a look at the Roadmap, see Nicolaisen's 'A Securities Regulator Looks at Convergence," www.sec/gov/news/spch040605dtn.htm, and Northwestern Journal of International Law & Business. Spring 2005. V. 25 (no. 1), pp. 661-686.

(116) "First-time Application of International Financial Reporting Standards," Securities Act Release No. 33-8567, April 12, 2005.

(117) "FASB and IASB Publish Memorandum of Understanding," Financial Ac counting Series No. 278-B: The FASB Report, March 31, 2006, pp. 1 and 3.

(118) Sue Bielstein, interview, March 19, 2007.

(119) www.sec.gov/news/press/2006-27.

(120) David Tweedie, email to author, August 14, 2008.

(121) Press Release, IASB and FASB publish update to 2006 Memorandum of Understanding. With the 2006 MoU the two Boards shifted their emphasis from short-term projects to long-term projects. That emphasis remained with the 2008 update to the 2006 MoU. Sue Bielstein, January 23, 2009.

(122) Anthony Cope, email to author, August 26, 2008.

(123) "Acceptance from Foreign Private Issuers of Financial Statements Prepared in Accordance with International Financial Reporting Standards without Reconciliation to GAAP," Securities Act Release No. 33-8818, July 2, 2007.

(124) Financial Accounting Foundation, December 18, 2007, pp. 2, 3, 7 and 11.

(125) Also, without EU carve-outs. Hans Burggraaff, email to author, September 8, 2008.

(126) "Acceptance from Foreign Private Issuers of Financial Statements Prepared in Accordance with International Financial Reporting Standards without Reconciliation to GAAP," Securities Act Release No. 33-8879, December 21, 2007.

(127) This concept release came as a surprise to the IASB. Anthony Cope, email to the author, August 26, 2008.

(128) "Concept Release on Allowing US Issuers to Prepare Financial Statements Prepared in Accordance with International Financial Reporting Standards," Release No. 33-8831, August 7, 2007.

(129) "Press Release: SEC Proposes Roadmap Toward Global Accounting Standards to Help Investors Compare Financial Information More Easily," sec.gov/ news/press/2008/2008-184.htm.

(130) Shortly thereafter, the FASB issued an FSP that included the guidance in the press release, making it authoritative. Sue Bielstein, March 2009.

(131) Press Release: SEC Office of the Chief Accountant and FASB Staff Clarification on Fair Value Accounting, www.fasb.org/news/2008-FairValue.pdf.

(132) See: International Accounting Standards Board Press Releases: "IASB Staff position on SEC-FASB clarification on fair value accounting," October 2, 2008, and "IASB announces next steps in response to credit crisis," October 3, 2008, at www.iasb.org.

(133) The IASB was criticized heavily for short-circuiting its due process. World Accounting Report commented, "In an astonishing volte-face, the IASB has had to bow to political pressure and abandon both a key tenet of IAS 39 and its own due process.... [The IASB's] independence and credibility have been called into question, and the banking lobby has once again demonstrated its political clout." (pp. 2-3)

(134) Proposed Rule: Roadmap for the Potential Use of Financial Statements Prepared in Accordance with International Financial Reporting Standards by US Issuers (Release No. 33-8982; Nov. 14, 2008), pp. 9-37.

(135) James Leisenring, IASB Member and Liaison to US FASB, interview, June 15, 2007.

(136) David Cairns, email to author, September 11, 2011. "[A] downside to this is that some other countries think the US has too much influence on IFRS."

(137) David Tweedie, email to author, August 14, 2008.

(138) David Cairns, email to the author, September 11, 2011.

(139) This changed in 2010 with the establishment of an independent Monitoring Group.

(140) David Cairns, email to author, September 11, 2011. "But the role of the monitoring board is different from that of the SEC in the US. The parallel to the SEC's role in the US would be, for example, an international regulator with not only authority over the IASB but also authority over financial reporting requirements in all jurisdictions."

(141) Ellen M. Heffes, "For FASB's Herz: 'The Ultimate Destination--A Single Set of Common Standards,'" Financial Executive. v. 23, no. 6, July/August 2007, pp. 12-14.

(142) David Tweedie, email to author; August 14, 2008. "If the US adopts the IFRS then LIFO will be an issue but this issue is already being considered by the [Internal] Revenue Service."

(143) Sue Bielstein observed that, to date, no national standard setter has been eliminated in those countries which have adopted IASs/IFRSs. Interview, January. 23, 2009.

(144) Progress report on IASB-FASB convergence work, 21 April 2011, www. fasb.org.

(145) Commission Statement in Support of Convergence and Global Accounting Standards, Securities and Exchange Commission, Release No. 33-9109, February 24, 2011, pp. 13-14.
Table 1.
Chairmen and Secretaries(-General)

Chairmen of IASC             Period       Origin

Sir Henry Benson             1973-76      UK & Ireland
Joseph P. Cummings           1976-78      US
John A. Hepworth             1978-80      Australia
J.A. (Hans) Burggraaff       1980-82      Netherlands
Stephen Elliott              1982-85      Canada
John L. Kirkpatrick          1985-87      UK & Ireland
Georges Barthes de Ruyter    1987-90      France
Art Wyatt                    1990-92      US
Eiichi Shiratori             1993-95      Japan
Michael Sharpe               1995-97      Australia
Stig Enevoldsen              1998-2000    Denmark
Tom Jones                    2000-01      US/UK

Chairman of IASB
Sir David Tweedie            2001-11      UK

Secretaries to 1983; Secretaries-General from 1984

Paul Rosenfield              1973-75      US
W.J. (John) Brennan          1975-77      Canada
Roy C. Nash                  1977-79      US
Allan V .C. Cook             1979-81      UK
Geoffrey B. Mitchell         1981-85      Australia
David Cairns                 1985-94      UK
Sir Bryan Carsberg           1995-2001    UK

Adapted from Robert J. Kirsch (2006), The International Accounting
Standards  Committee: A Political History. London: CCH/
WoltersKluwer, Appendix 1, p. 381.

Table 2.
FASB Chairmen and Their Terms of Service

Marshall S. Armstrong    November 1, 1972--December 31, 1977
Donald J. Kirk           January 1, 1978--December 31, 1986
Dennis R. Beresford      January 1, 1987--June 30, 1997
Edmund L. Jenkins        July 1, 1997 June 30, 2002
Robert H. Hers           July 1, 2002--September 30, 2010
Leslie E Seidman         October 1, 2010--

Source: Charry D. Boris, Manager, Library Services, Financial
Accounting Foundation.

Table 3.
Characteristics of the New IASB Board Members

                           Former IASC Board

Name                     Country *      Member or    Liaison
                                        Observer
Sir David Tweedie            UK            Yes          No
Thomas E. Jones            UK/USA          Yes          No
Mary E. Barth--PT           USA            No           No
Hans-Georg Bruns          Germany          No          Yes
Anthony T. Cope            UK/USA          Yes          No
Robert P. Garnet         S. Africa         Yes          No
Gilbert Gelard             France          Yes         Yes
Robert H. Herz--PT         USA/UK          No           No
James Leisenring            USA            Yes         Yes
Warren McGregor          Australia         No          Yes
Patricia O'Malley          Canada          No          Yes
Harry K. Schmid         Switzerland        Yes          No
([double dagger])
Geoffrey Whittington         UK            No          Yes
Tatsumi Yamada             Japan           Yes         Yes

Name                       Classification

Sir David Tweedie       Academic/Std. Setter
Thomas E. Jones                Analyst
Mary E. Barth--PT         Auditor/Academic
Hans-Georg Bruns              Preparer
Anthony T. Cope                Analyst
Robert P. Garnet          Preparer/Analyst
Gilbert Gelard            Auditor/Preparer
Robert H. Herz--PT             Auditor
James Leisenring           Standard setter
Warren McGregor            Standard setter
Patricia O'Malley          Standard setter
Harry K. Schmid               Preparer
([double dagger])
Geoffrey Whittington    Academic/Std. Setter
Tatsumi Yamada                 Auditor

PT = part time

* The first country is the country of birth; the second country
indicates the Board  member had many years of professional service
there.
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Title Annotation:p. 27-51
Author:Kirsch, Robert J.
Publication:Accounting Historians Journal
Geographic Code:1USA
Date:Jun 1, 2012
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