In 2002, the FASB and the International Accounting Standards Board (IASB®) set up a formal collaboration program that aimed to achieve convergence on major financial reporting topics. As a result of their collaboration, the boards issued largely converged accounting guidance on revenue recognition, business combinations, and fair value measurement, and the accounting guidance on stock compensation and earnings per share is also largely converged. However, the boards were unable to reach agreement on converged solutions in all areas; for example, despite initially working together on leases and credit losses, they were unable to converge their guidance on those topics. In addition, their objective of developing converged guidance on the classification and measurement of financial instruments, the distinction between liabilities and equity, derecognition of financial assets, and the accounting for postemployment benefits never made significant progress and proved unattainable. After the boards issued a largely converged revenue recognition standard in 2014, their joint work program was discontinued.

Although the differences between US GAAP and IFRS Accounting standards that are most significant to an entity will depend on its industry and activities, there are certain differences that entities commonly encounter. Some of these more significant differences pertain to financial assets (e.g., classification, derecognition, and measurement of credit impairments), financial liabilities (e.g., distinguishing liabilities from equity and bifurcation of convertible debt), and leases (e.g., subsequent measurement of right-of-use assets and presentation for certain leases). See Deloitte’s Roadmap Comparing IFRS Accounting standards and US GAAP: Bridging the differences for more detailed discussions of these topics.

In recent years, the two boards have been working largely independently of each other. For example, the IASB has issued a new standard on insurance contracts, and the FASB has issued ASUs to refine its guidance on revenue recognition, leases, stock compensation, and hedge accounting and has made significant changes to its guidance on convertible debt. Even when addressing similar issues, the boards have often formed different views; for example, they have each issued different guidance to address reference rate reform. The conclusions reached by interpretive bodies can also result in differences. For example, the IFRS Interpretations Committee has issued a large number of agenda decisions that affect how IFRS Accounting standards are interpreted and applied.

As of the date of this publication, both the FASB and the IASB have a significant number of projects on their respective agendas to consider improvements to their existing guidance. Some look at common issues, but many of the issues are being addressed by only one board. Thus, both sets of accounting standards are likely to continue to change over the foreseeable future, and the issuance of new or revised guidance has the potential to create even more differences between the two sets of standards or to change the nature of existing differences.