Abstract: Utilizing archival materials as well as personal interviews and correspondence with personnel of the Financial Accounting Standards Board (FASB) and International Accounting Standards Committee /Board (IASC/B), including former Board chairmen and staff members, this paper examines the development of the working relationships between the FASB and the IASC/B from their earliest interactions in 1973 through the transformation of the IASC into the IASB and the Convergence Program rooted in the 2002 Norwalk Agreement up to 2008.
In 1973, two nongovernmental organizations (NGOs) important to the future development of accounting standard setting were established: the International Accounting Standards Committee (IASC) and the US Financial Accounting Standards Board (FASB). Teegen, Doh and Vachani [2004, pp. 463-465] define NGOs as "private, not-for-profit organizations that aim to serve particular societal interests by focusing advocacy and/or operational efforts on societal, political and economic goals, including equity, education, health, environmental protection and human rights." The emergence of NGOs as institutions filling voids where governments and firms have been unwilling or unable to meet consumer and citizen needs underlines their importance and justifies an examination of their role in globalization. Both the IASC (and its successor, the International Accounting Standards Board, or IASB) and the US FASB have proven to be vital promoters of the globalization of international financial accounting standards.
This paper traces the evolution of the relationship between these organizations through analysis of correspondence preserved in the IASC files located in the archives of the IASC Foundation, (1) as well as analysis of published documents of the FASB and the IASB. It is fleshed out with information from correspondence and interviews with individuals who participated in the developments. The paper proceeds through the following sections: The First Twelve Years; Deepening Contacts: The Next Ten Years; The FASB Seeks to Involve the IASC; The IASC/ IOSCO Core Standards Program; the G4+l; Restructuring the IASC; The Strategy Working Party; The FASB/IASB Convergence Program; Summary and Prospect; and Epilog.
THE FIRST TWELVE YEARS
The IASC was founded by the accountancy bodies of nine countries: Australia, Canada, France, Germany, Japan, Mexico, the Netherlands, the United Kingdom and Ireland (UK), and the United States (US) as a private sector NGO. A part-time body of standard setters who met three or four times a year in various cities around the globe, it had a small, full-time secretariat at its London location. (2)
The FASB was founded in 1973. Its creation was based upon the recommendations of the 1972 Wheat Committee of the American Institute of Certified Public Accountants (AICPA) to replace its predecessor, the eighteen-member Accounting Principles Board (APB), which was controlled by the profession. The FASB was established to ensure that its seven full-time standard setters acted in the interests of financial statement users. The Board was composed of former auditors, preparers, and users of financial information [Miller, Redding and Bahnson, 1994, pp. 36-38]; traditionally, one member came from academe.
The FASB's authority derives from the Securities and Exchange Commission (SEC), which, since its founding in 1934, has looked to private-sector NGOs to provide directions for financial reporting practices and now recognizes their standards as "authoritative" and "generally accepted" for purposes of US federal securities laws. (3) With respect to non-public companies, the FASB's authority comes from the AICPA and its requirements governing the responsibilities of auditors who are AICPA members. (4) Thus, the FASB operates within a regulatory environment that may limit its independence, whereas the IASC and, until …