But is it possible the new project will also mean dramatic changes to the income statement as companies know it? "Absolutely," says Herz, but he is careful to add that "the project doesn't really redo any of the accounting. It's all [about changing the] display and disaggregation to give a richer picture of what's really going on."

By that he means an income statement that resembles, and is easier to compare with, a cash-flow statement. Herz anticipates that the new income statement will "differentiate between [income from] operating activities, financing activities, and maybe other gains and losses," just as a cash-flow statement does today. That, hopes Herz, would allow users "to see that the income statement and cash-flow statement are two different ways of looking at performance — one on an accrual basis and one on a cash basis — and use them together."

Of course, changing the presentation still would have significant implications. For one thing, the two boards recently decided to pursue the IASB's initial approach, which requires management to conform to a standardized definition of financing, instead of FASB's approach, which would have allowed management to determine whether income was the result of operations or financing. That constraint could displease companies with big financing arms, such as General Electric Co. and Caterpillar.

Blessed with Guidance
Despite Herz's quip, there is still more that separates FASB and the IASB than brands of Scotch. Even on stock-option expensing, for example, the boards disagree on the correct income-tax accounting. A far greater issue is the voluminous nature of U.S. GAAP. "We have guidance on everything six times over," says Herz, "and you can quote me on that." Tweedie agrees; one of the agenda items in October was an administrative meeting to discuss how the accounting regime might move more toward standards in principle, rather than ones that attempt to include guidance covering all possible scenarios.

Brod says the members of FEI's Committee on Corporate Reporting prefer the simplicity of IFRS. But that's a Catch-22 for FASB, which constantly hears that its constituents prefer principles-based rules, but also must deal with the U.S. legal system and a shell-shocked accounting industry, both of which demand detailed guidance. This may prove to be yet another area where the IASB can help its U.S. counterpart deal with its sometimes difficult constituencies.

Of course, the IASB has its own difficulties with its constituents. Indeed, the flip side to any suggestion that the two boards have an easier time passing standards together is that joint efforts expose them to twice the friction from politicians and constituents. On the first day of the October meeting, members of both boards were abuzz about news reports of a speech the previous day by European commissioner Charlie McCreevy in which he said, "I would like to stress that convergence is not an invitation to standard setters to try and advance the theoretical frontiers of accounting. I will not take on board any revolutionary new standards.... The main objective is to try and narrow the differences between the existing standards, not to make accounts even more indigestible with a whole set of new standards."

That appears to fly in the face of the Norwalk Agreement, and illustrates how standard setters remain the target of considerable pressure. But the boards are now in a stronger position to resist it, and that's reason enough for finance executives to take notice.

Tim Reason is a senior editor at CFO.

All A Board
Now, which of you folks actually live in Norwalk?

At the joint Financial Accounting Standards Board-International Accounting Standards Board meeting this past October at FASB's Norwalk, Connecticut, headquarters, it wasn't hard to see why convergence of U.S. and international accounting standards is moving so quickly. In fact, it was harder to tell the two boards apart. The respective heads of FASB and the IASB, Robert H. Herz and Sir David Tweedie, were seated side by side and took turns chairing, while members of both boards and their staffs sat evenly interspersed around the rectangle of tables in the small amphitheater that serves as FASB's boardroom. The October gathering was the seventh such meeting, held in Norwalk each fall and in London each spring.

Although the boards meet in person only twice a year, their staffs work together daily via phone, E-mail, and video conference, exhibiting the easy familiarity of co-workers from the same office. And while debates often grow intense — even heated — over accounting questions, they offer observers little sense of any parochial differences. (With four North Americans on the IASB, even accents aren't a foolproof gauge.)

Indeed, although the purpose of the semiannual meeting is to hammer out those areas in which the boards don't agree, debate doesn't necessarily split along those lines. In a discussion on revenue recognition this past October, for example, it quickly became clear that members of each of the boards were divided among themselves. "There are a lot of different views within FASB and within the IASB," says Ed Nusbaum, CEO of Grant Thornton and an adviser to FASB. "They're not unified on some of the concepts, particularly when it comes to fair value. Where they are unified is in the desire to have convergence." — T.R.

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