FASB and IASB Merging Utilities Industry Standards Not Likely
After attempts to merge utilities industry standards with the International Accounting Standards Board (“IASB”), Financial Accounting Standards Board (“FASB”) member Thomas Linsmeier recently announced that U.S. GAAP and IFRS differences have created challenges that make potential future convergence projects unlikely. At an accounting conference last month, Linsmeier referenced the FASB and IASB’s heavy investment in utilities financial reporting, and their preference in the U.S. GAAP’s cost-of-service model. However, the IASB is considering other models that differ from Topic 980, Regulated Operations, a decades-long model which offers standards for utilities that recognize regulated assets and liabilities within the industry. Further, the model that the IASB currently favors varies from U.S. GAAP by handling the regulatory agreement as a revenue-generating contract, and labeling the regulator as a customer.
In response, Linsmeier remarked that he doesn’t see the FASB making any significant changes to its model. Representing fellow board members, Linsmeier declared the FASB’s top responsibility is to serve the interests of U.S. GAAP users, and a shift to IASB would not help matters.