On December 4, 2007, the U.S. Financial Accounting Standards Board (FASB) issued a revised Statement of Financial Accounting Standards (SFAS) No. 141, Business Combinations, as well as the related new SFAS No. 160, Noncontrolling Interests in Consolidated Financial Statements. Both statements represent significant changes to financial reporting under U.S. GAAP resulting from the FASB's joint efforts with the International Accounting Standards Board to converge U.S. GAAP with International Financial Reporting Standards. And as is often the case with the Boards' joint efforts, the newly-issued standards are intended to improve and simplify financial reporting while moving closer to a common set of financial reporting standards.
SFAS No. 141R and SFAS No. 160 "represent the completion of the FASB’s first major joint project with the International Accounting Standards Board (IASB), as well as a significant convergence milestone," according to FASB member G. Michael Crooch, who added "These standards and the counterpart standards issued by the IASB will improve reporting while eliminating a source of some of the most significant and pervasive differences between International Financial Reporting Standards (IFRS) and U.S. Generally Accepted Accounting Principles (GAAP)." While the FASB and IASB have been conducting many joint Convergence projects for several years, this is the first project that the Boards consider "done" -- at least for now, and despite the fact that U.S. GAAP and IFRSs are not fully converged on the issues that the standards address. When it comes to Convergence on these issues, "close enough" seems to have been "good enough" for the Boards, who apparently believe they have bigger fish to fry and are therefore unlikely to revisit these issues anytime soon.
In particular, SFAS No. 160 is just one example of how willing the FASB is to implement a new U.S. financial reporting standard when that standard represents a significant improvement over prior GAAP and is converged with existing IFRSs. But the Convergence of U.S. GAAP and IFRSs is a two-way street -- there are many examples of the IASB changing IFRSs to improve them and converge them with existing U.S. GAAP (e.g., IFRS 8, Operating Segments). Most important of all, U.S. financial managers should know that the Boards are conducting other longer-term projects that will converge U.S. GAAP and IFRS by introducing improved standards that are very different from either Board's existing standards.
