Fairly aligned: the continuing convergence of U.S. GAAP and IFRS.

• Author: Davis, A. Christine
• Position: Regulatoryupdate

in May 2011, FASB issued Accounting Standards Update No. 201 1-04, fair Value Measurement (Topic 820); Amendments to intendments to Achieve Common Fair value Measurement and Disclosure Requirements in US. GAAP and IFRS (ASU 2011-04). Simultaneously, the IASB issued IFRS l3, Fair Value Measurement. The significance of the dual issuance is notable:

1. From a global perspective, the new guidance is viewed as a completion of a major project toward convergence of U.S. GAAP and IFRS pursuant to a 200G Memorandum of Understanding between FASB and the IASB:

2. From an IFRS perspective, IFRS 13 provides significant fair value guidance as, for the first time there is a precise definition of fair value and a single source of fair value measurement and disclosure requirements (U.S. GAAP had largely accomplished this goal when it issued FAS 157. Fair Value Measurements, in 2006); and

3. From a U.S. GAAP perspective, ASU 201 I-04 is the result of continued developments in guidance on fair value measurements.

   A Significant Step Toward Convergence

   In February 2006, FASB and the IASB issued Memorandum of Understanding, in which the boards determined they would work to achieve the convergence of accounting standards through the development of "high quality common standards over time." With the jointly developed ASU 201 1-01 and IFRS 13, the boards believe convergence is a step closer.

   FASB and the IASB believe their respective lair value measurements and disclosures guidance are aligned and. thus, provide improved comparability of fair value measurements presented and disclosed in financial statements prepared in accordance with U.S. GAAP and IFRS.

   The ASU 201 1-04 and IFRS 13 guidance relates to how to measure lair value where lair value accounting is already required or permitted by other standards, 'fife provisions in U.S. GAAP and IFRS have minimal differences limited to measuring the fair value of investments in investment companies and deposit liability; and to disclosure requirements pertaining to Level 3 of (he fair value hierarchy and nonpublic entities. The rest of this article focuses on U.S. GAAP.

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   Continued Guidance for U.S. GAAP

   ASU 201 1-04 updates Topic 820 in the FASB Accounting Standards Codification (ASG). The amendments in AST 201 1-0 I can be classified into two categories:

1. Amendments that dairy how to apply the existing fair value measurement and disclosure provisions in Topic 820.

2. Amendments that change a...