Question

What is the Norwalk Agreement?

Answer 1

Norwalk Agreement

Norwalk is a place in Connecticut, USA where an agreement was signed in September 2002 between the Financial Accounting Standards Board (FASB), the US standard setter, and the International Accounting Standards Board (IASB) wherein each aacknowledged their commitment to the development of high-quality, compatible accounting standards that could be used for both domestic and cross-border financial reporting.

To achieve compatibility, the FASB and IASB (together, the “Boards”) agree, as a matter of high priority, to:

a) undertake a short-term project aimed at removing a variety of individual differences between U.S. GAAP and International Financial Reporting Standards (IFRSs, which include International Accounting Standards, IASs);

b) remove other differences between IFRSs and U.S. GAAP that will remain at January 1, 2005, through coordination of their future work programs; that is, through the mutual undertaking of discrete, substantial projects which both Boards would address concurrently;

c) continue progress on the joint projects that they are currently undertaking; and,

d) encourage their respective interpretative bodies to coordinate their activities.

The Agreement was a significant step towards the US formalising its commitment to the convergence of US GAAP and International Financial Reporting Standards.