VideoOn Wednesday, members of the Financial Accounting Standards Board and the International Accounting Standards Board met in FASB's Connecticut office. What was the upshot of the get-together? Apparently the two standards-setting groups agreed to try to agree.
No joke. The heads of both boards have asked their staffs to select the better accounting standard in each of 15 areas, according to published reports.
The boards will then make a formal decision on how to proceed following public comment.
The end game: to harmonize accounting standards by 2005. That happens to be the deadline for all publicly traded companies in the European Union to adopt international accounting standards.
"What has happened here is quite historic," Sir David Tweedie, chairman of the IASB, reportedly said. "This is a public commitment that we will try to get rid of those differences. What we are trying to do is move as quickly as we can to get a compatible set of standards."
But Tweedie and Robert Herz, his FASB counterpart, told reporters they are realistic enough to expect intensive political and corporate opposition when it comes time to deciding which standard to adopt.
"If we propose certain things in order to achieve convergence and they affect particular companies or industries I expect there will be opposition," Herz told FT.com.
While the boards said they will seek convergence in such areas as how companies make restatements when accounting standards change and the classification of short- and long-term liabilities, they did not talk about the hotly debated issue of expensing stock options.
The IASB is expected to come up with its own proposal on that subject within the next few weeks. FASB has already chosen to invite public comment on any differences between the IASB draft and existing U.S. rules. "We have a duty to look at it and come up with a good answer that is the same or similar to what they have put in," Herz told the Web site of the Financial Times.
The reality, though, is that a meaningful convergence of accounting standards won't occur unless both sides agree to compromise. "Everybody has to recognize that both have to be willing to change," Herz told Dow Jones. "This is about change for everybody."
FASB will meet on October 2 to discuss the issue of convergence. The IASB approved the convergence project back in July.
FASB to Decide on Stock Options
Meanwhile, FASB indicated it would decide within a year whether U.S. companies will need to expense stock options. The standards board is seeking comments on the hot topic from investors and businesses during the next month.
Keep in mind that FASB tried to require companies to treat options as expenses back in 1995. U.S. companies successfully lobbied Congress to force FASB to dilute the rule, however.
"It's an issue that's very much on the minds of our constituents, investors, people on Main Street, and Congress as well," Herz told Bloomberg Wednesday during FASB's joint meeting with the IASB.
Currently, companies must disclose options expenses in the footnotes of their annual reports if they don't expense the grants.
The IASB has said it will require European companies to deduct employee stock options from earnings by the end of the year.
As CFO.com reported, a panel of The Conference Board on Tuesday called on FASB to require companies to expense stock options.
D&T Warned, A&P Dismissed
Some commotion down at the supermarket.
The Great Atlantic & Pacific Tea Co. acknowledged in a public filing that it fired independent auditor Deloitte & Touche one day after the accountancy had warned the company about questionable internal controls relating to the timing of the recognition of certain vendor allowances. A&P dismissed D&T as its independent auditor on September 10, hiring PricewaterhouseCoopers instead.
What's more, it appears that D&T had actually informed the chairman of A&P's audit committee about the "reportable condition" as early as August 21.
A reportable condition is defined under generally accepted auditing standards as "matters coming to an auditor's attention that represent significant deficiencies in the design or operation of internal control that could adversely affect the entity's ability to initiate, record, process, and report financial data consistent with the assertions of management in the financial statements."
A&P stressed in the filing that during the two most recent fiscal years, and the subsequent interim period through the date of D&T's dismissal, there were no disagreements between the company and D&T on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure. If there had been such a disagreement, and it was not resolved to D&T's satisfaction, the auditor would have been forced to make reference to the subject matter of the disagreement in connection with its reports.
Management at A&P said it previously disclosed that it conducted a review related in part to certain irregularities relating to the timing of recognition of vendor allowances. The review examined the internal controls for vendor allowance accounting.
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