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For nearly 40 years, the International Accounting Standards Board (1ASB) 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) to serve equity investors, lenders, creditors, and others in globalized capital markets. When the IASB took over from the IASC in 2001, few countries had adopted International Accounting Standards (as IFRS were then called) even for cross-border public sales of securities, let alone for domestic public companies.
That all changed - and quite dramatically - with two events. First, in 2000, the International Organization of Securities Commissions (IOSCO) endorsed IFRS for cross-border securities offerings in the world's capital markets. Then, in 2002, the European Union made the bold decision to require IFRS for all companies listed on a regulated European stock exchange starting in 2005. Those events started a snowball rolling, to the point where today roughly 100 countries require IFRS or a national word-for-word equivalent for all or most listed companies.
Almost from the outset, a key goal of the IASB and the IFRS Foundation, under which the IASB operates, has been to bring the United States on board. In a plenary address at the World Congress of Accountants in 2002, Paul Volcker, the first chairman of the Foundation's trustees, said: "I do not think it reasonable today, if it ever was, to take the position that U.S. GAAP should, de facto, be the standards for the entire world. Rather, the International Accounting Standards Board, whose oversight trustees I chair, is now working closely with national standard setters throughout the world to develop common solutions to the accounting challenges of the day. The aim is to find a consensus on clearly defined principles, and I am delighted that the American authorities appear sympathetic to that objective."
In October 2002, the 1ASB and FASB signed a memorandum of understanding that has come to be known as the "Norwalk Agreement." The two boards pledged...