The Financial Accounting Foundation (FAF), the parent organization of the U.S. standard setter FASB, has outlined its preferred path for incorporating IFRS into U.S. GAAP.
In a letter to the SEC, FAF Chairman John Brennan described a number of recommended changes to the approach dubbed “condorsement.” The SEC floated the condorsement concept in a work plan released in May as one possible path to IFRS for U.S. public companies.
FAF pointed to concerns about condorsement, including that it would shift “significant authority to an international governance structure early on” and dilute the SEC’s power to ensure investor protection in the U.S. capital markets as standard setting moves to an international body.
FAF favors what it described as “U.S. Incorporation Commitment” under which members of FASB and other “major market national standard setters” would have nonvoting observer rights on the International Accounting Standards Board (IASB), with the power to participate in the IASB’s deliberations. FASB would also conduct due process and post-implementation reviews in the U.S. for all IASB agenda items and standards.
The approach recommended by the FAF Trustees, Brennan wrote, is “based on the premise that, over time, international standards will become the foundation of U.S. GAAP.”
“A new major international standard should be incorporated into U.S. GAAP if that standard improves the quality of financial reporting already in place in the U.S.,” the letter states. “Other international standards would be incorporated that maintain the quality of financial reporting in the U.S. but also advance global comparability of financial reporting.”
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