One day we may not need to produce a publication comparing IFRS and US GAAP because they will be sufficiently converged that there will be no need for a comparison between the two sets of standards. However, there is much to do before this could become the reality, and most observers are unwilling to speculate about when that level of convergence will be achieved.

In Belgium, despite the adoption of IFRS for the consolidated financial statements of several types of companies, Belgian GAAP remains the required accounting framework for company financial statements, because of the current impact on tax, company laws and SMEs (small and medium size entities). The current situation is indeed as follows for Belgian companies:

• Consolidated financial statements. IFRS as adopted by the European Union are required as from financial year 2005 for listed companies, as from 2006 for banks and as from 2007 for those companies that only have bonds listed. Other companies are allowed since 2004 to early adopt IFRS instead of Belgian GAAP in their consolidated financial statements (irrevocable choice).
• Company financial statements. Belgian GAAP is still mandatory for company financial statement (except for listed real-estate investment trusts that must apply IFRS for company financial statements as from 2007).

The International Accounting Standards Board (IASB) and the US Financial Accounting Standards Board (FASB) have been committed to converging IFRS and US GAAP since the Norwalk Accord of 2002. Preparers and others, including regulators, have called for convergence to simplify financial reporting and reduce the compliance burden for listed companies, especially those with a stock market listing in more than one jurisdiction. The Securities and Exchange Commission (SEC), in its more recent ‘roadmap’ towards removing the US GAAP reconciliation requirement for foreign private issuers using IFRS, has cited the continuing convergence of IFRS and US GAAP as a key building block. In addition, the European Commission has thrown its weight behind convergence as part of its strategy to better protect domestic investors who invest in non-European companies.

The two boards have three major types of convergence projects underway:

• joint projects where the standards are expected to be the same word-for-word (Business Combinations Phase 2 is the first example of this approach);
• short-term projects where convergence on the answer in either US GAAP or IFRS seems possible on a fast-track basis (deferred tax accounting is an example); and
• developing a consensus approach on long-term projects that are more conceptual in nature (revenue recognition and the conceptual framework are examples).

While all of these initiatives are in play, we are starting to see some resistance from commentators. The joint proposals on business combinations have proved controversial. The early experience of standards that are converged in broad principles only, such as share-based payments, is that convergence at a high level removes only the broad conceptual differences but replaces them with detailed application differences.

A further concern is that the potential benefit of standards produced with the same text could be shortlived. We have two official interpretative bodies: the International Financial Reporting Interpretations Committee (IFRIC) and the Emerging Issues Task Force (EITF). But in addition, the FASB produces guidance in the form of staff position papers, while numerous national guidance groups and regulators charged with enforcing IFRS for their listed companies are starting to add to the literature. If all of these interpretive and regulatory bodies cannot work in harmony and avoid adding multipleµ rules and varying interpretations to the principles, the end goal of worldwide harmonised accounting standards may not be reached.

This might all seem rather pessimistic, but few worthwhile goals are achieved easily. In the meantime, PricewaterhouseCoopers remains committed to supporting convergence on a single set of reporting standards for companies in the capital markets, and I believe that collectively the capital market constituencies can achieve this goal. Until we arrive at convergence, you may find this publication useful in helping you identify key differences between IFRS, US GAAP and Belgian GAAP. This latest version has been updated to include all standards and interpretations published up to August 2006.