IASC-U.S. Comparison Project
IASC-U.S. Comparison Project (Second Edition)The IASC-U.S. Comparison Project: A Report on the Similarities and Differences between IASC Standards and U.S. GAAP
Second EditionOctober 1999
The second edition of this comprehensive comparative study of International Accounting Standards Committee (IASC) standards and U.S. GAAP is now available from the FASB. This 500-page report includes comparative analyses of each of the IASC's "core standards" to their U.S. GAAP counterparts. The analyses that were included in the first edition have been revised and new analyses have been added to reflect changes in both IASC standards and U.S. GAAP through December 1998. A summary comparison of IAS 10, Events after the Balance Sheet Date, which was approved in March 1999, also is included.
Once confined by national borders, transactions in today's capital markets often are driven by a demand for and supply of capital that transcends national boundaries. High-quality accounting standards are a necessary and important element of a sound capital market system. With the increase in cross-border capital raising and investment transactions comes an increasing demand for a set of high-quality international accounting standards that could be used as a basis for financial reporting worldwide. The FASB believes that international accounting standards should increase international comparability while maintaining the highest possible quality accounting standards. The FASB has been working independently and with other standard setters around the world, including the IASC, to achieve that objective. The IASC-U.S. comparison project contributes to that effort by providing a basis for further progress toward international comparability.
Last year, the IASC substantially completed its work program to develop a set of "core standards" to be used in financial statements for cross-border securities listings. Those standards are under consideration by the International Organization of Securities Commissions for endorsement. The U.S. Securities and Exchange Commission is undertaking a concurrent evaluation in considering whether IASC standards should be permitted for use by foreign issuers in U.S. capital markets.
What does this mean for U.S. investors? Investors need to adequately prepare themselves to understand differences between IASC standards and U.S. GAAP. Until now, U.S. investors in U.S. markets have been provided with either U.S. GAAP financial statements or reconciliations from foreign financial statements to U.S. GAAP. Those favoring acceptance of IASC standards wish to replace those reconciliation requirements, which many would-be foreign registrants consider too "onerous." Using IASC standards without reconciliation to U.S. GAAP will shift the burden to U.S. investors attempting to compare investment opportunities among foreign and domestic companies competing for capital on the same market.
Standard-setters, financial statement preparers and auditors, and regulators also need to be aware of similarities and differences between the financial reports that would be produced under IASC standards and those produced under national standards. As part of its evaluation of the IASC's core standards, the SEC will seek input from those that have an interest in the content and quality of the financial reports of foreign issuers that list securities in the United States. This report can assist participants in that process in gaining a better understanding of the similarities and differences between IASC standards and U.S. GAAP. The report analyzes and compares each of the IASC's core standards (up to and including IAS 39, Financial Instruments: Recognition and Measurement) to U.S. GAAP in such areas as scope, definitions, recognition and measurement requirements, and display and disclosure requirements. The IASC-U.S. comparison report will be a useful guide for future efforts toward greater comparability of accounting standards and financial reporting worldwide.
The objectives of the FASB's publication, The IASC-U.S. Comparison Project: A Report on the Similarities and Differences between IASC Standards and U.S. GAAP, are to provide:
- An information base that can be used in assessing the acceptability of IASC standards for securities listings in the United States
- A tool for investors, financial analysts, and other users of financial statements to use in comparing U.S. enterprises with enterprises that use IASC standards
- A basis for the FASB and IASC to raise the quality of their standards while narrowing the differences between them.
The report describes a wide range of similarities and differences between IASC standards and U.S. GAAP. IASC standards and U.S. GAAP covering the same topic may be mostly similar, they may differ in the extent or specificity of implementation guidance, they may be very different in their general approach, or they may explicitly permit a choice of alternative approaches that can result in either very similar or very different accounting treatments between the two sets of standards. In addition, there are cases in which either the IASC standard or the related U.S. GAAP addresses a topic not explicitly addressed by the other. Finally, there are differences attributable to specialized accounting topics addressed only by U.S. GAAP.
The report was reviewed by a former Secretary-General of the IASC, a former IASC Research Fellow, current IASC staff members, SEC staff, and a number of financial analysts and academics, many of whom are authors of various international accounting publications. All those reviewers provided useful comments and suggestions that were incorporated into the final report.
Part I of the study provides an introduction to the issue of use of IASC standards in U.S. and other national capital markets, a summary of the similarities and differences between IASC standards and U.S. GAAP identified by the FASB staff, and conclusions on the prospects for international comparability. Each chapter in Part II provides a comparative analysis of an IASC standard and its U.S. GAAP counterpart. Summaries at the beginning of the analysis chapters highlight the most significant observations. This report will be an invaluable resource to accounting practitioners, academics, analysts, and others with an interest in international accounting or a need to understand similarities and differences between IASC standards and U.S. GAAP.