Feel-good moments in accounting are rare, but the Federal Accounting Standards Board and International Accounting Standards Board recently reached a milestone in establishing global, converged accounting standards: revised principles for measuring the fair value of assets and liabilities, including illiquid, hard-to-value securities.

The implications for banks and other financial institutions are clear, particularly with respect to four new standards dealing with off-balance sheet activities and fair-value accounting.

Throughout the process, the FASB and the IASB have demonstrated the ability to listen to input during due process to achieve a converged result of high quality.

Unfortunately, different regulatory environments around the globe mean there is no guarantee that converged standards will yield converged results. In a sense, the real work has just begun.

After years of contemplation, the convergence effort aims to develop a single set of accounting standards to provide comparable financial information to investors around the world.

This effort is particularly pressing for illiquid securities, which have grown increasingly complex and have suffered from arbitrary and outcome-oriented valuation judgments. This was highlighted in the recent report from the Senate's Permanent Subcommittee on Investigations into Wall Street's collapse, which found that Deutsche Bank relied on higher "marks" on a collateralized debt obligation to paint a rosier picture of the CDO's investment performance.

Fair value, when estimated without rigorous and informed judgment, is nothing more than a highly subjective forecast.

Similarly, accounting standard setters, financial institutions, regulators, auditors and investors must understand that when standards are converged, the application of those rules may still vary significantly.

As long as regulatory and enforcement environments around the world differ, so will the interpretation and application of the rules.

Consider oversight in the NBA versus the NCAA. Converged standards may ensure that the size of the court and the height of the basketball goals are the same. However, the location of the three-point line differs, as does the definition of a "traveling" infraction and other nuances. These variations in a rule's application change not only the look and feel of the sport but may actually determine the outcome of a game.

It is the same with converged accounting standards. Even when the same rules are in use, fair-value determination in a country where auditors are heavily influenced by regulators may differ from that in a country where auditors are allowed to focus more on a "true and fair view."

This problem was prevalent during the financial crisis as the FASB was forced to amend SFAS 157, pertaining to fair-value measurement, in October 2008 and May 2009 to react to misapplication of the dictated principles. For example, fair-value accounting principles prohibit the use of fire-sale pricing, yet many preparers, often pushed by auditors, used last transaction pricing to estimate fair value.

Fortunately, other examples provide support for the notion that the IASB-FASB convergence ideal can be achieved, especially concerning fair-value estimates.

Issuing converged accounting standards for fair value demonstrates that the FASB and the IASB are capable of exercising appropriate due process to arrive at common, high-quality measurement and disclosure rules for fair value. This fact, as well as a recent history of cooperation and accounting harmony, should provide confidence that true global convergence can eventually be achieved. Yet vigilance should remain the watchword, as significant differences regarding securities regulation, audit standards, auditor regulation and inspection, potential liability for misstatements and financial reform laws must be addressed in order for converged accounting standards to actually result in comparable global financial reporting.