...the past nine years seen the accounting policy making suggesting a complete overhaul in the way financial statements are reported and a convergence between the US's generally accepted accounting principles (US GAAP) and the International Financial Reporting Standards (IFRS). This has been through various meetings between the International Accounting Standards Board (IASB) and US Financial Accounting Standards Board (FASB), two boards which determine these accounting standards. This paper therefore evaluates the history of the two boards and their relationship and looks at IASB equivalents to FASB original pronouncements. It also describes how a Master of Science in Accounting would prepare a student for an accounting profession. History of the Relationship between FASB and IASB US Financial Accounting Standards Board (FASB) is a board which is responsible for setting and improving financial accounting standards in the US and for governing and fostering preparation of financial reports by non-governmental organizations (Financial Accounting Standards Board, 2012).International Accounting Standards Board (IASB) on the other...
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...Revenue Recognition within the IASB and FASB Revenue Recognition within the IASB and FASB Revenue is a critical number to any user of financial statements in determining an organization’s financial position and performance. Although this is the case, there are many differences between revenue recognition for U.S. GAAP (Generally Accepted Accounting Standards under the FASB) and IFRS (International Financial Reporting Standards under IASB). Along with these differences comes need for improvement in both reporting methods. IFRS has fewer requirements for revenue recognition in comparison to U.S. GAAP, and is made up of two central revenue recognition standards: IAS 18 (revenue) and IAS 11 (construction contracts). These standards are said to be fairly difficult to apply and understand, and give little guidance on important topics for users. On the other hand, U.S. GAAP is made up of a very wide range of revenue recognition concepts and has countless requirements for specific transactions and specific industries. This makes is very difficult for users to apply these reporting standards and makes it even harder for users of these financial statements to determine the entity’s performance, as accounting for different transactions and industries can result in different numbers for economically similar situations. IFRS may not be perfect, but overall I believe it provides a simpler and more user-friendly set of accounting standards for revenue-recognition than U.S. GAAP. IASB’s...
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...financial position and financial activity of an entity and permit comparison among other entities. To obtain a true “apples to apples” comparison between entities the statements should be uniform in underlying assumptions, measurements, and general presentation guidelines. Accounting standards produces the guidelines and regulations required for consistency among financial reporting between numerous entities. Accounting standards develop with economic development. In the early development of accounting standards the standards were region specific. For example, individual nations developed accounting standards specific to its economy and the needs of the users in the nation’s economy by establishing a committee or a board. Currently there are two main accounting standard setting boards, the Financial Accounting Standards Board (FASB) and the International Accounting Standards Board (IASB). These two boards are currently collaborating in a goal to establish a “single set of high-quality accounting standards for all listed and other economically significant business enterprises around the world” (Schroeder, Clark, & Cathey, 2011, p. 85). The FASB is an accounting standards board that evolved in the United States from the first accounting standards committee, Committee on Accounting Procedure (CAP). CAP became Accounting Principles Board (APB) that was later replaced by FASB (Schroeder, Clark, & Cathey, 2011). The IASB is an international accounting standards board that derived...
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...acceptable business practices in regard to the relationship between these functions. In the United States, that governing body is known as the Financial Accounting Standards Board or FASB. FASB helped to refine and establish what is known as the Generally Accepted Accounting Principles or GAAP. These principles have laid the foundation for modern day accounting practices and have served as a road map for financial accountants worldwide. In 2001, a new board was established to bring unity to international accounting practices. It is known as the International Accounting Standards Board or IASB. IASB has its own set of standards commonly known as International Financial Reporting Standards or IFRS. Together these two entities lay the groundwork for accountants to follow to most accurately and ethically report the financial activities of their respective organizations. Although both these organizations have striking similarities and strive to serve a common goal, there are marked differences in their approach to financial reporting standards. In recent years, FASB and the IASB have affirmed their commitment to bring together their basic fundamentals and create a unified accounting resource that will become the standard for accounting practices across the world. This effort is known as the FASB/IASB convergence project. This project will address and make efforts to eliminate the existing differences between the two boards. The ultimate goal of this project will be to provide an...
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...BUS5613 | Will the U.S. Adopt IFRS? | U.S. Integration of IFRS | | Christopher Anglin | 5/3/2015 | | Will the U.S. Officially Adopt IFRS? Initially, as a student relatively new to the study of international accounting standards and regulations, I assumed that the United States would be leading the efforts of an internationally accepted accounting standard, and I was both correct and incorrect in that assumption. The fact that the U.S. has the economic influence that it has, and its ties around the world, my assumption that other countries would follow suite, in hind sight, was naive. Days into my research, after being flooded with circumstantial evidence and factual evidence and information both supporting and denouncing the United States influence on this topic, I came up with one conclusion and one conclusion only, the U.S. will adopt IFRS or a future IFRS-like standard that is fully recognized by the international community, and it will not be U.S. GAAP. I am not stating that U.S. GAAP will no longer exist; I am saying that IFRS will be accepted as an equal to the U.S. GAAP and in the future, U.S. domestic reports will reflect and be tailored to IFRS requirements ultimately taking precedents over domestic accounting principles in an effort to save time and money. As we have all learned over the years, large scale changes in the United States take time and they are often slowly integrated over the years to not upset the delicate balance of domestic politics...
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...cooperation developments. Efforts have increased during the past decade to move nations toward using international standards. The International Accounting Standards Board (IASB) is an organization that regulates the accounting standards which are accepted globally by almost all the countries in the world. This paper will first discuss the history of IASB. Next it will explain the structure of IASB. After that, the paper will talk about how International Financial Reporting Standards (IFRS) are created. Finally, it will describe the effort to converge IFRS with Generally Accepted Accounting Principles (GAAP). History of IASB International Accounting Standards Board was first known as International Accounting Standard Committee (IASC) which existed from 1973 to 2001. It was responsible for developing the International Accounting Standards (IASs) and promoting the use and application of these standards. After nearly 25 years of achievement, the IASC concluded that it must find a way to converge between national accounting standards and practices, and create high-quality global accounting standards. To do that, IASC saw a need to change its structure in order to better work together toward global harmonization. The IASC operated until April 2001 when the International Accounting Standards Board (IASB) assumed its accounting standard-setting responsibilities from it. (Hoyle B., Doupnik S. and Schaefer F) The headquarters...
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...Prepared Remarks by Sir David Tweedie, Chairman of the International Accounting Standards Board (IASB), to the US Chamber of Commerce Event, “‘The Future of Financial Reporting: Convergence or Not?”’ Washington, DC, USA 10 March 2011 I would like to thank the US Chamber of Commerce and its Center for Capital Market Competitiveness for organising today’s event on the future of financial reporting. I have a great affinity with the United States and have always enjoyed my time here. With that in mind, it is not surprising that we at the IASB and the Financial Accounting Standards Board (FASB) have worked so successfully in partnership over the past decade. I am delighted to present at the same event as my friend and colleague, Leslie Seidman. This event on the future of financial reporting is timely. Years from now, we will look back on 2011 as a year when the future path of financial reporting was determined. There are two key activities coming to a head this year. First, the IASB and the FASB are now nearing the completion of a nine-year programme to improve International Financial Reporting Standards (IFRSs) and US generally accepted accounting principles (GAAP) and to bring about their convergence. Second, the US Securities and Exchange Commission (SEC) will make a decision on the use of IFRSs by US domestic companies. The SEC’s decision will be felt well beyond the borders of the United States. Today, more than 100 countries either require or permit the use of IFRSs for listed...
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...1. Should the University adopt a “rules based” approach or a “principles approach” to students who are late submitting coursework? Outline the advantages and disadvantages of each approach. Advantages of principles approach * The primary benefit of principles-based accounting rests in its broad guidelines that can be applied to numerous situations instead of detailed rules. * Simpler standards, easier to understand and apply. * The use of principles-based accounting standards may provide accounting statements that more accurately reflect a company’s actual performance as it reduces manipulation of the rules. Disvantages of principles approach * The problem with principles-based guidelines is that lack of guidelines can produce unreliable and inconsistent information that makes it difficult to compare one organization to another. * Difficult to compare one entity to another. Advantages of rules based approach * Clarity in application * Reduction in risk * Strict rules that give clear guidelines and more accuracy * Requirements are set out in detail and compliance with the rules can be more easily monitored and enforced. Disavantanges of rules based approach * Can cause unnecessary complications * Confusion * Encourages financial engineering 2. Rules-based accounting adds unnecessary complexity, encourages financial engineering and does not necessarily lead to a ‘true and fair view’...
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...calculations. This paper will provide information on three different companies and several calculated ratios, information on the differences in the International Accounting Standards Board (IASB) and the Financial Accounting Standards Board (FASB) and last the differences in industries and how they affect the presentation. Differences in the IASB and the FASB Domestic and foreign corporations have two different accounting standards to follow when preparing their financial statements. The FASB creates the standards for domestic companies and the IASB creates the standards for international organizations. Although the FASB and the IASB are currently working on a convergence project to streamline these accounting measures and create a set of standards that both domestic and international companies can use uniformly, this is a project that will take years to complete and perfect. For now, the differences in these standards result in differences in presentation of the financial statements between domestic and foreign companies. The measurement of value or fair value in particular, is one of the most important factors affecting how the values are reported between the IASB and the FASB standards. The IASB uses fair value along with other methods of valuation of assets. The FASB uses a fair value measurement...
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...steps taken by both the FASB and IASB to move to fair value measurement for financial instruments? In what ways have some of the approaches differed? IFRS and GAAP are comparable regarding essential bookkeeping and reporting issues that join. With recognizable proof and estimation of remittance records, accounts receivables, recording rebates, and the diminishment procedure to represent awful obligation and considering. Notwithstanding, FASB (Monetary Bookkeeping Gauges Board) and IASB (Universal Bookkeeping Norms Board) have made moves to execute reasonable worth estimation to money related instruments. Therefore restricting variables, FASB and IASB have embraced a fragmentary methodology. The primary step the two have taken is unveiling the fitting utilization data in the notes. Step two is the appropriation of the honest option that permits organizations to record some monetary instrument at reasonable esteem in money related articulations (Kimmel, 2013). The third step is recognizing the multifaceted nature and all-inclusiveness of perceiving the range of incomes in monetary reporting. FASB and IASB have likewise worked together in the advancement of another single income acknowledgment standard. Both FASB and IASB are of the conclusion that straightforwardness and appreciation of money related articulations can increment if organizations record and report every budgetary instrument at reasonable quality. A percentage of the feedback on both FASB and IASB is that they speak to...
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...confidence in the transparency of financial reporting worldwide. IFRS, acronym for International Financial Reporting Standards are financial reporting standards that have been adopted by International Accounting Standard Board (IASB). Increasing number of publicly held companies in many countries are now requiring or allowing the use of IFRS for the preparation of financial statement. In the United States, the Securities and Exchange Commission (SEC) have also proposed a “Roadmap” in incorporating the convergence of US Generally Accepted Accounting Principles (US GAAP) to IFRS with the help of Financial Accounting Standards Board (FASB) and IASB. The IASB and FASB, committed to improving IFRS and US GAAP and achieving their convergence, are also committed in providing public transparency and accountability by reporting their process in achieving their goals. In 2006, the IASB and FASB began to set out their plans of completing major projects in their issued Memorandum of Understanding (MoU). These priority major projects comprises of their joint projects on financial instruments, revenue recognition, leasing, insurance contracts, the presentation of other comprehensive income, fair value measurement, and the consolidation of investment companies. Above that, the IASB will also work on the matter of improving disclosure of derecognized assets and other off balance sheet risks and also consolidations particularly in relation to structured entities. In their most...
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...account for bad debt and factoring. However, FASB (Financial Accounting Standards Board) and IASB (International Accounting Standards Board) have taken steps to implement fair value measurement to financial instruments. As a result opposing factors, FASB and IASB have adopted a fragmentary approach. The first step the two have taken is disclosing the appropriate use information in the notes. Step two is the adoption of the fair market alternative that allows companies to record some financial instrument at fair value in financial statements (Kimmel, 2013). The third step is acknowledging the complexity and universality of recognizing the area of revenues in fiscal reporting. FASB and IASB have also collaborated in the development of a new single revenue recognition standard. Both FASB and IASB are of the opinion that transparency and comprehension of financial statements can increase if companies record and report all financial instruments at fair value. Some of the criticism on both FASB and IASB is that they represent a split model. The critics claim that some financial instruments state at fair value. Some loans and receivables (reported assets) with remunerated cost can create an illusion two companies. The notion of one business is looking for two results from similar securities accounting for those securities in different methods (Kimmel, 2013). It is being hinted that possibly IFRS 9 would be revised or replaced as the FASB and IASB, to proceed with the best approach for financial...
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...International Financial Reporting Standards (IFRS) and US generally accepted accounting principles (GAAP) are two main accounting principles that is widely used in the majority of the companies. However, there will be still conflict in the interpreting and understanding each other financial statements due to these two different approaches. Therefore, to overcome this problem, International Accounting Standards Board (IASB) and Financial Accounting Standards Board (FASB) are working on it by taking the necessary steps as time passes to close down the gap and standardised the accounting principles globally making it easier for all parties. (157 words) 1.0 Introduction In the world of globalization, a number of countries had been experiencing the convergence of their local GAAP and IFRS in order to apply the international accounting standard to suit the growing business world. This does not left out the people of the United States who are also trying to converge the accounting standards of US GAAP and IFRS in order to close down the gap between the accounting standards. FASB and IASB are the main international bodies assisting the Securities and Exchange Commission (SEC) to achieve this goal. 2.0 Benefits 2.1 Facilitate international business and economy growth There are a number of benefits that people can gain from the convergence of US GAAP and IFRS. For example, the convergence of these accounting standards will...
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...Introduction The globalization of the world economy led to the escalation of cross border investment opportunities. This, in turn, made the need of financial information essential in international capital market. Relevant and reliable financial information aids in making economic decisions relating to the reporting entity. Also enables its users to measure and quantify the economic and financial aspects of an enterprise. Kothari and Barone (2006:23) believe that 'accounting is becoming increasingly globalized'. However, ‘current accounting practice does not meet the information needs of capital market in the 21st century ’(View Point, 2007:1). To meet the diversified needs and expectations of the users a single framework of financial reporting is essential. Payne and Raagan (2008:15) also consider that 'A universal financial reporting standard would help participants in the world's capital markets and other users make economic decisions'. CONCEPTUAL FRAMEWORK AND ACCOUNTING STANDARDS Barth (2006) explains that the definitions of financial statement elements along with the objective and the qualitative characteristics of financial reporting are set by the conceptual framework. It is aimed at the current and prospective equity and debt capital providers to help them in their capital allocation decision. Consequently, the conceptual framework ensures relevant and reliable financial reporting and thus meets the need of shareholders and other users. It is an important...
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...International Accounting Standards Board (IASB) in 2001, SEC leaders have repeatedly indicated that the logical choice for globally accepted standards is the International Financial Reporting Standards (IFRS) issued by the IASB. However, in line with other large economies, such as Japan, India and China, as of June 2012 the US had not adopted IFRS.1 This paper explores when and how, and indeed if, IFRS will become the basis for the financial reporting of domestic SEC registrants in the US. Readers are encouraged to first review Erchinger’s (2012) history of the SEC’s consideration of IFRS in the US included in this forum and especially Table 1 of this article, which provides a chronology of SEC releases regarding incorporation of IFRS into the US financial reporting model. This paper complements Erchinger’s by assessing approaches recently explored by the SEC for incorporating IFRS into the US financial reporting model. A decision can lead to correct or incorrect action. However, as articulated by many SEC constituents, uncertainty associated with repeated delays and hence ‘no decision’ by the SEC is clearly not in the best interest of investors and other financial statement users, registrants, auditors and students. Furthermore, as it considers various models for incorporation of IFRS into the US financial reporting model, the SEC and its constituents must understand that only if all countries, including the US, adopt IFRS as issued by the IASB will the SEC’s pursuit of global accounting...
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