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Moving forward in its effort to align European and U.S. corporate financial statements, the Financial Accounting Standards Board on Monday proposed changes to how companies value assets and calculate earnings per share. FASB also proposed altering how companies should backdate changes to accounting policies and how they should account for spoiled inventories. In addition, the board said it was preparing a proposal on how to classify liabilities as either current or noncurrent. FASB said the changes are part of its drive to standardize global accounting standards. Experts have said adoption of common accounting rules would ease cross-border mergers. “The exposure drafts put forth by FASB today are important not so much for the issues but for the fact that FASB is holding true to its word that they are looking to foster convergence,” said Robert Willens, a tax specialist at Lehman Brothers in New York. “They are abandoning prior positions and showing some good faith in moving toward international GAAP standards. Harmonization of standards is something that is going to have some legs going forward and the [International Accounting Standards Board] will most likely also make some concessions.” The IASB is a London-based organization that sets financial reporting standards for publicly listed European companies. In its proposals, known as exposure drafts, FASB recommends adopting certain key IASB standards. For instance, FASB would require companies to retroactively show the effect on net income from any changes in accounting rules, as required under international standards. The goal is to make it easier for investors to compare results in the current reporting period to prior periods. U.S. companies are not required to change past reports to reflect changes in net income that stem from rule modifications. Sir David Tweedie, chairman of the IASB, hailed the move. “In pursuing the convergence goal, the two boards will improve the quality of their existing standards, while reducing differences that cause unnecessary confusion and barriers to cross-border investment and economic growth,” he said in a statement. All five proposals are subject to public comment until April 2004. The IASB and FASB are also working on proposals to limit differences in corporate accounting for research and development costs, income taxes and interim reporting. In addition, the two boards hope to reach similar conclusions on issues related to business combinations, share-based payment and revenue recognition. Copyright �2003 TDD, LLC. All rights reserved.

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