IASB and FASB Publish First Joint Proposals To Improve The Accounting And Reporting Of Business Combinations

Norwalk, CT, June 30, 2005—The International Accounting Standards Board (IASB) and the U.S. Financial Accounting Standards Board (FASB) today each published an Exposure Draft containing joint proposals to improve and align the accounting for business combinations. The proposals include a draft standard that the Boards developed in their first major joint project. The objective of the project is to develop a single high-quality standard for accounting for business combinations that could be used for both domestic and cross-border financial reporting. The proposed standard would replace the existing requirements of the IASB’s IFRS 3 Business Combinations and the FASB’s Statement No. 141, Business Combinations.

Introducing the Exposure Draft, Sir David Tweedie, IASB Chairman, said:

I am delighted with the progress of the first major joint project. The development of a single standard demonstrates the ability of the IASB and the FASB to work together. By focusing on fundamental principles and avoiding exceptions the proposals aim to eliminate many of the inconsistencies in the existing guidance for accounting for business combinations.

Robert Herz, FASB Chairman, added:

A common standard on the very important area of accounting for business combinations will help users and preparers by improving the comparability of financial information reported by companies around the world that issue financial statements in accordance with either International Financial Reporting Standards or U.S. GAAP.

The proposals in the Exposure Drafts retain the fundamental requirement of IFRS 3 and Statement 141 to account for all business combinations using a single method—where one party is always identified as acquiring the other. The principal changes being proposed include a requirement to measure the business acquired at fair value and to recognize the goodwill attributable to any noncontrolling interests (previously referred to as minority interests) rather than just the portion attributable to the acquirer. The proposals would also result in fewer exceptions to the principle of measuring assets acquired and liabilities assumed in a business combination at fair value. Additionally, the proposals would result in payments to third parties for consulting, legal, audit, and similar services associated with an acquisition being recognized generally as expenses when incurred rather than capitalized as part of the business combination.

The IASB and the FASB today also published Exposure Drafts that propose that noncontrolling interests be classified as equity within the consolidated financial statements and that acquisitions of noncontrolling interests be accounted for as equity transactions.

The Exposure Drafts are available on the FASB’s website at and the IASB’s website at The comment period for the Exposure Drafts ends October 28, 2005. The FASB and the IASB plan to hold public roundtable meetings to gather additional input on the proposals.

About the Financial Accounting Standards Board

Since 1973, the Financial Accounting Standards Board has been the designated organization in the private sector for establishing standards of financial accounting and reporting. Those standards govern the preparation of financial reports and are officially recognized as authoritative by the Securities and Exchange Commission and the American Institute of Certified Public Accountants. Such standards are essential to the efficient functioning of the economy because investors, creditors, auditors and others rely on credible, transparent and comparable financial information. For more information about the FASB, visit our website at

About the International Accounting Standards Board

The International Accounting Standards Board, based in London, began operations in 2001. It is funded by contributions collected by its Trustees, the IASC Foundation, from the major accounting firms, private financial institutions and industrial companies throughout the world, central and development banks, and other international and professional organisations. The 14 IASB members (12 of whom are full-time) are drawn from nine countries and have a variety of professional backgrounds. The IASB is committed to developing, in the public interest, a single set of high quality, global accounting standards that require transparent and comparable information in general purpose financial statements. In pursuit of this objective, the IASB co-operates with national accounting standard-setters to achieve convergence in accounting standards around the world.