What are the potential benefits that a common conceptual framework could bring to standard-setting process? What are the potential benefits of convergence to investors? What is the potential impact of convergence on entities that operate globally?
IASB and FASB are jointly working together on the review of IASB's Framework for the Preparation and Presentation of Financial Statements.
Answers
For a long time now, the accounting world has been bilingual - they have two accounting languages - the US GAAP (FASB) and the IFRS (IASB). In October 2002, FASB and IASB announced an MOU (Norwalk Agreement), formalizing a commitment to converge US GAAP and IFRS. However, convergence proved difficult. Standard setters couldn't agree on what's best, and the approval process was very lengthy. Some of the convergence projects were successful, some were partially successful and some were either discontinued or resulted in different IASB and FASB standards because the two boards just could not agree! In 2015, SEC signalled the end to convergence efforts, citing virtually no support to have SEC mandate IFRS for all the registrants.
If the convergence efforts were successful for all the projects, the world would have one accounting language. This would save time and costs for the companies (especially MNCs) as there's one set of principles they'll have to follow for financial consolidation. This would also help everyone in the accounting world to work anywhere without the hassle of learning a whole new country-specific accounting principles/standards.
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Accounting