d. An agreement between the FASB and the IASB to make their existing standards compatible as soon as possible and to work together to ensure compatibility in the future. The Norwalk Agreement refers to the Memorandum of Understanding signed in September 2002 between the Financial Accounting Standards Board (FASB) and the International Accounting Standards Board (IASB). The committees decided to make their accounting standards compatible as soon as possible and to work together on compatibility in the future. This agreement is called the Norwalk Agreement because the boards held a joint meeting in Norwalk. What does the agreement say about Norwalk?a. An agreement between them. The Norwalk agreement refers to a Memorandum of Understanding signed in September 2002 between the Financial Accounting Standards Board (FASB), the U.S. standards body, and the International Accounting Standards Board (IASB).  The agreement is as it was reached at Norwalk. One. An agreement between the FASB and the SEC allowing foreign companies to use IFRS when filing financial statements with the SEC .b. An agreement between the US FASB and the UK Accounting Standards Board to converge their respective accounting standards as soon as possible.
With the expiration of the so-called “Norwalk” agreement, which both boards of directors signed in 2002, and with the growing impatience of the IASB and its parent company, the IFRS Foundation, at the Securities and Exchange Commission`s non-approval of the use of IFRS in their financial statements by U.S. public companies, the IASB decided to move to a more multilateral approach to the implementation of the standard. Instead of working monthly in joint meetings with the United States to finalize the standards, the FASB is now one of the largest national and regional groups that are part of the Accounting Advisory Forum. Instead, he sees the end of convergence as the conclusion of a more defined – and highly successful – project. “Convergence was a limited project,” he wrote in an email to the CFO. As the body responsible for establishing a single set of improved, globally recognized, high-quality accounting standards, the IFRS Foundation must remain committed to the long-term goal of the global application of IFRS as developed by the IASB in its entirety and without modification. Convergence can be an appropriate short-term strategy for a given territory and facilitate adoption during a transition period. However, convergence does not replace adoption. Approval mechanisms may vary from country to country and require a reasonable period of time to implement them, but regardless of the mechanism, they should allow and require relevant entities to disclose that their financial statements are in full compliance with IFRS issued by the IASB. Call it a new realism.
Like Hoogervorst, FASB President Russell Golden cites the many successes of convergence efforts that began with the 2002 Norwalk Accord (named after FASB Headquarters Norwalk, Connecticut). Under this agreement, the FASB and the IASB signed a Memorandum of Understanding on the convergence of accounting standards. The proposed lease is perhaps the clearest example of how such differences have led to a collapse of convergence. After half a decade of deliberations, following an agreement in principle on the notification of leases of more than 12 months in the company`s balance sheets, the two boards of directors announced their decision to approach leasing reports differently at a joint meeting on August 27. The split led to disagreement over whether lease accounting should take a dual or ad hoc approach. The Norwalk Agreement refers to a Memorandum of Understanding signed in September 2002 between the Financial Accounting Standards Board (FASB), the Standard Setter and the International Accounting Standards Board (IASB).  The agreement is referred to as having been concluded at Norwalk. The attached “Convergence Results” table contains my admittedly subjective views on the success of convergence and the resulting improvements to IFRS for each of the projects listed in the various agreements between the IASB and the FASB. In closing, I would like to add that convergence was perhaps the most realistic way to initiate the application of IFRS in the United States, but that such an agreement is not sustainable in the long term. Rather, the best approach for each country is the full adoption of IFRS. As the Directors of the IFRS Foundation recently stated in their 2011 Strategic Report report, mistakes in meeting common standards on two important issues – leasing and financial instruments – appear to have left an informed assessment of the obstacles they have been trying to overcome for so long.
(The boards also appear to be following their separate paths for accounting for insurance contracts, although this is not part of the original MOU.) The recent divergence “compels us to recognize that differences in the cultural, business, legal and regulatory environment in different jurisdictions will inevitably lead to some differences in these norms,” Golden wrote. While the attached convergence results table provides my perspective on the success of convergence and the resulting improvements to IFRS for each of the projects listed in the various arrangements between the IASB and the FASB. Finally, I would like to add that convergence was perhaps the most realistic way to introduce the application of IFRS in the United States, but that such regulation is not sustainable in the long term. On the contrary, the best approach for each country is to adopt IFRS. As the DIRECTORS of the IFRS Foundation noted in their recent 2011 Strategic Report, the FASB and IASB have made slow but steady progress on these other three projects, and a final consolidated standard for revenue recognition has been promised for the first half of this year after being repeatedly delayed. However, significant obstacles remain to the final agreement on convergent standards for leasing and financial instruments. These standards have also been postponed several times, with some organizations and cross-sectoral organizations rejecting various changes previously proposed by the two bodies. In addition, the FASB and the IASB continued to differ on issues such as the treatment of credit losses under the proposed financial instrument.
The insurance accounting project has never seemed to have as high a priority as the other three projects, at least for fasB. c. An agreement between the President of the SEC and the European Commissioner for the Internal Market that allows EU companies to list securities in the United States without providing a reconciliation under US GAAP. Editor`s note: Paul Pacter was a member of the International Accounting Standards Board (IASB) from July 2010 to December 2012. This analysis and table represent the views of Pacter and do not necessarily reflect the views of other current or former members of the IASB or the official positions of the IASB or the IFRS Foundation. Investors would be better served if all publicly traded U.S. companies used accounting standards published by a single global standard setter as the basis for preparing their financial reports. To do this, it would be preferable to move U.S.
public companies to an improved version of International Financial Reporting Standards (IFRS). All this has changed – quite dramatically – with two events. First, in 2000, the International Organization of Securities Commissions (IOSCO) adopted IFRS for cross-border offerings of securities on global financial markets. Then, in 2002, the European Union took the bold decision to require IFRS for all companies listed on a regulated European stock exchange from 2005 onwards. These events have unleashed a snowball, to the point that today, about 100 countries require IFRS or a word-for-word national equivalent for all or most publicly traded companies. For nearly 40 years, the International Accounting Standards Board (IASB) and its predecessor, the International Accounting Standards Committee (IASC), have been working to develop a set of high-quality, understandable and enforceable International Financial Reporting Standards (IFRS) that serve equity investors, lenders, creditors and others in globalized financial markets. When the IASB succeeded the IASC in 2001, few countries had themselves adopted International Accounting Standards (as IFRS were then called) for cross-border public sales of securities, let alone domestic public limited companies. As a result of these and other initiatives, the FASB expects significant progress towards international convergence in the coming years. However, due to the magnitude of the differences and the complexity of some issues, the FASB assumes that there are many differences between the United States. .