...International Convergence of Accounting Standards Standardization is a common theme across many sectors as the world continues an ever developing push towards globalization. This globalization requires the economic integration of nations into an international economy. In order to achieve integration it was recognized that there needed to be a standardized accounting system for financial information to be exchanged and interpreted. Thus, a goal and a path were developed to obtain the International Convergence of Accounting Standards. To understand the International Convergence of Accounting Standards knowledge is needed of its meaning, the roles of the IASB and FASB, it's history, where the world is in its process, futures plans, its benefits, and what the International Convergence means for Accounting in the US. Meaning of International Convergence of Accounting Standards: The FASB believes that the goal of convergence is to establish an exclusive set of reputable, international accounting standards. Convergence allows for companies both domestic and internationally to use the same standards for financial reporting. The path needed to develop such standards involves the FASB and the IASB to facilitate their efforts to improve upon the U.S. generally accepted accounting principles and the International Financial Reporting Standards and eradicate the differences between the two. Description of IASB & FASB and their roles: The International Accounting Standards Board...
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...http://www.academia.edu/640120/Convergence_of_Accounting_Standards_Internationalization_of_Accounting The concept of convergence first surfaced in the late 1950s in response to World War II economic integration showing that the idea of International Convergence of Accounting Standards is not new. At first, the convergence focused on the principles used in major capital markets around the world. By the 1990s, the idea of harmonization was replaced by the notion of convergence and the International Accounting Standards Committee was formed in 1973, which was the first international standards-setting body. The FASB and the IASB have been working together toward convergence since 2002. The Financial Accounting Standards Board believes that the ultimate goal of convergence is a single set of high-quality, international accounting standards that companies would use for financial reporting. Currently, the collaborative efforts of the FASB and IASB is used to both improve U.S. GAAP and IFRS to eliminate the differences between the two. In November 2009, a joint statement showed the IASB and the FASB reaffirmed a commitment to improving IFRS and US GAAP in achieving convergence. The plan gave priority to the major Memorandum of Understanding projects for which they believe the need for improvement of IFRS and GAAP is most urgent. The projects include joint projects on financial instruments, revenue recognition, fair value measurement, and the consolidation of investment companies...
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...Convergence or Adoption: From U.S. GAAP to IASB Deanna E. West American Public University Accounting 600 Professor: Dr. Kuhn Abstract This paper discusses how the Financial Accounting Standards Board (FASB) and the International Accounting Standards Board (IASB) signed the Norwalk Agreement in 2002, and agreed to work together towards the development of high-quality, compatible accounting standards that could be used globally. The creation of short-term and long-term convergence plans in order to assist the boards in prioritizing so that they could adhere to their agreement of “compatibility as soon as practicable.” The outcome of 37 key joint IASB/FASB projects based on the results of the Convergence table by Paul Pacter and the ongoing debate of convergence of IASB and FASB, or the sole adoption of IASB. Convergence or Adoption: From U.S. GAAP to IASB September 18, 2002, in Norwalk, Connecticut, the IASB and the FASB signed a memorandum of understanding in which the two boards promised to work hard to “(a) make their existing financial reporting standards “fully compatible” as soon as is practicable and (b) to coordinate their future work programs to ensure that once achieved, compatibility is maintained.” This became known as the Norwalk Agreement. Under the Norwalk Agreement the IASB and the FASB each agreed that they would commit to the development of high-quality, compatible accounting standards that could be used for both cross-border and domestic financial reporting...
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...Running head: THE IASB AND FASB The IASB and FASB Amber Lynch ACC/541 Week 1 Paper March 10, 2014 The IASB and FASB Although the concept of the convergence of accounting standards is a new concept to some the idea has existed since the 1950’s. This idea came about as a solution for economic integration and the uptick in international business operations. When the project was first constructed it focused mainly on harmonizing the differences in principles that existed across many different capital markets throughout the world. The idea of harmonization remained in place until the 1990’s when the concept of convergence became the new priority. The concept of convergence centers on the concept of creating one set of accounting standards that would be used across all of the major financial markets in the world (FASB, n.d.). In order for this set of accounting standards to be uniform it requires the International Accounting Standards Board (IASB) and the Financial Accounting Standards Board (FASB) to work together towards the creation and implementation of the standards. The FASB has been the organization in charge of establishing the standards for financial accounting in the private sector within the United States since 1973 (FASB, n.d.). These standards are formally recognized by both the Securities and Exchange Commission and the American Institute of Certified Public Accountants (FASB, n.d.). They are more commonly known as Generally Accepted Accounting Principles...
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... 2014 Accounting Standards Boards The International Accounting Standards Board (IASB) and the Financial Accounting Standards Board (FASB) first converged in 2002 following the Norwalk Agreement (Whittington, 2007). The convergence was inspired by the need of the boards to produce a solid infrastructure by uniting the two frameworks represented by each board in a bid to harmonize accounting practices worldwide (Whittington, 2007). Additionally, the convergence was also inspired by the need to attain improvement in accounting standards by achieving completeness, and improving coherence (Whittington, 2007). In the IASB framework for example, Bullen, and Crook (2005) note that there were specific areas of difficulty that benefited from the convergence. Some of these areas include the explicit meaning of what liability is, and the distinction between equity and liability. Joining Forces During the FASB/IASB convergence announcement in 2002, the two boards stated that they would work together to develop accounting standards for both cross-border and domestic financial reporting. They also stated that they would work toward making their respective standards compatible, and that future work programs would be done with the need to retain compatibility (Schroeder, Clark & Cathey, 2011). Another development in the FASB/IASB relationship took place in 2004 when the two bodies announced that they were working on two joint projects. The...
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...Accounting Standards Boards Paper Jacobian Stephens ACC/541 June 29, 2015 Mrs. JoEtta Malone Accounting Standards Boards Paper The Financial Accounting Standards Board (FASB) started the Convergence program back in 2002 and stated that a three-part strategy for seeking greater comparability in accounting standards internationally should be implemented.. FASB sought out to develop a higher quality for Generally Accepted Accounting Principles (GAAP) standards and improve the relations and communication with additional nationwide standards setters. The convergence program is to help increase the quality of recording standards. FASB and IASB recognized that increasing the comparability of principles will not be as easy as they thought. To do so, they will need the help of setters around the world to have an agreement amongst the standards. We also have to remember that FASB priority is to improve financial reporting. Doing so will help investors. Eliminate any other alterations between IFRSs and U. S. GAAP that may remain on January 1, 2005 by undertaking projects that both Boards would address simultaneously. Carry on the progress on the joint projects presently proceeding. Inspire their consistent interpretative bodies to organize their activities. FASB has been the nominated union in the private division for generating standards of financial bookkeeping that administer the training of financial reports by non-governmental entities. To improve and establish principles...
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...relationship between the International Accounting Standards Board (IASB) and Financial Accounting Standards Board (FASB). The research paper will discuss also how the Master’s of Science in Accounting (MSA) at University of Phoenix prepares students for a successful carrier within the accounting profession. The increasing number of multinational companies, especially, after 1990 s made it difficult for the accounting information users to analyze the financial statements. As a result, there is an increasing need to have one set of accounting standards to enhance comparability. Historically, the issuers of the financial statement where in the same country and had the same standards as the users of the accounting information. Many multinationals companies generate a significant part of their revenue from different parts of the world, and it became difficult to allocate efficiently the scarce resources without a reliable accounting system. Investors and creditors are skeptic to invest or lend money in corporations that operate on transnational markets without a good understanding of their financial positions. To enhance the understanding of investors and creditors there is a move to harmonize the accounting standards between different countries. FASB is the standard setting body in the US and is the primary source of Generally Accepted Accounting Principles (GAAP). In 2001, The International Accounting Standards Board (IASB) was created and is a private sector body that establishes and...
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...Financial Accounting Standards Board (FASB) and the International Accounting Standards Board (IASB) began their joint commitment in 2002 to improve both generally accepted accounting principles (GAAP) and International Financial Accounting Standards (IFAS). The mission of these two boards is to try to make both methods of accounting standards as compatible as possible. The two boards are trying to come to a common denominator that will allow use for both domestic and cross-border financial reporting. The FASB and IASB are also working on a number of individual standard issues to help make FASB and IASB standards more compatible (Schroeder, Clark, & Cathy, pp. 79, 2011). The two boards were sure to have these projects completed by the end of 2011. Brief History of the Two Boards The concept of international convergence first arose in the late 1950s in response to post World War II economic integration and related increases in cross-border capital flows (“International Convergence Of Accounting Standards-Brief History”, n.d.). Convergence replaced harmonization in the 1990s, which is a high set of standards to be use in almost all the major capital markets. More than one hundred countries require or permit the use of IFAS. Since 1973, FASB has been the designated organization in the private sector for establishing standards of financial accounting and reporting in the United States (FASB and IASB Agree To Work Together Toward Convergence Of Global Accounting Standards”, 2002)...
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...but the language of the country where they reside, and the currency used in preparation of the financial statements. “If investors and creditors cannot obtain understandable financial information about companies that operate in foreign countries, they are not likely to invest in or lend money” (Schroeder, Clark & Cathey, 2011). The result is a move by the International Accounting Standards Board (IASB) and the Financial Accounting Standards Board (FASB) to harmonize and eventually converge accounting standards commonly used in different countries. History of the relationship between the FASB and the IASB The IASB was formed in 1973 and is based out of London, England. They develop and enforce financial reporting standards for publicly held companies. The first efforts to harmonize domestic and international financial reporting standards (IFRSs) focused on “reducing differences among accounting principles used in major capital markets around the world” (FASB, 2012). Starting in the 1990s, convergence of financial standards replaced the notion of harmonization. Convergence focused on the development of a “single set of high quality, international accounting standards to be used in at least all major capital...
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...Standards Board (IASB) to independently develop and establish a single set of accounting procedures for international business. Since the reorganization of the IASB, the use of these international financial reporting standards (IFRSs) have been required or permitted in over 100 countries, including the European Union ("What Have IASB And FASB Convergence Efforts Achieved?", 2013). The IASB aims to make the entire world follow guidelines for financial reporting to make use and comparability of financial reports more consistent across all geographical areas. The Financial Accounting Standards Board (FASB) is the independent body that is responsible for the creation of GAAP. The board is the standard setting body in charge of standards for nongovernmental companies operating in the United States. Since 2002, the IASB and FASB have been working together to improve and converge U.S. GAAP and IFRS. The United States is not the only country working toward convergence, as of 2009, Japan and China were both working toward convergence of IFRS as well as their accounting standards. In February 2010 the Securities Exchange Commission (SEC) issued statements of support of the convergence in IFRS and U.S. GAAP. The FASB intends to analyze each of the differences within the scope and either (1) amend applicable U.S. GAAP literature to reduce or eliminate the difference or (2) communicate to the IASB the Board’s rationale for electing not to change U.S. GAAP. Concurrently, the IASB will review IFRS...
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...Relationship between the IASB and the FASB ACC 541 Relationship between the IASB and the FASB The United States plays an enormous influence on the accounting standards set forth throughout the world in the global economy. The United States follows the Financial Accounting Standards Board (FASB) which has created a large number of accounting standards that are interpreted and accepted by international companies and by the International Accounting Board (IASB). The IASB plays a similar role like the FASB for the rest of the global economy. The IASB is located in London, England and is an independent, privately funded accounting standard-setter. The IASB board consists of members from nine different countries with the IASB’s sole purpose to ‘achieve convergence in accounting standards throughout the world’ (Cellucci, 2011). The IASB and FASB have been collaborating since 2002. This collaboration was derived to create a convergence of the United States Generally Accepted Accounting Principles (GAAP). The convergence project started when the two organizations met during a joint meeting in Norwalk, Connecticut on September 18, 2002. The two board’s goal for the convergence project was for developing a high-quality compatible accounting standards that can be used for both domestic and cross-border financial reporting. They also promised to use their best efforts to make their existing financial reporting standards compatible as soon as practicable and to coordinate their...
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...The Relationship between IASB and FASB Doris Edwards ACC/541 – Accounting Theory and Research Instructor - Leslie Crews, JD, MBT March 28, 2011 Financial Accounting Standards Board History The Financial Accounting Standards Board (FASB) is a private sector organization that was established in 1973. The FASB is governed by the Financial Accounting Foundation (FAF). The FAF appoints the members of the Financial Accounting Standards Advisory Council (FASAC), the council is the entity that informs the FASB of pressing issues or topics to be reviewed (2003, Webster’s). The goal of the FASB is to set standards for financial accounting practices and the production of financial reports. The FASB works to ensure that financial reporting is; transparent, reliable, relevant, comparable, and consistent. It is the responsibility of the FASB to regularly review standards, to check for deficiencies within the current standards, and to also look for methods to improve reporting based on current day needs. As set by Section 108 of the Sarbanes-Oxley Act any standard set by the FASB is recognized to be “generally accepted” for the purpose of the federal securities laws (Schroeder, 2011). The FASB initially issued standards through two different types of pronouncements, these are more commonly known as Statements of Financial Accounting Standards...
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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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...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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...Standards Boards The IASB (Internal Accounting Standards Board) set standards dealing with international accounting and FASB (Financial Accounting Standards Board) has standards dealing with international accounting but they mainly focus on accounting within the United States. The purpose of the convergence is to eliminate the differences dealing with international accounting and to have a much better focus on the consistence of the standards for international accounting. In 2003 FASB and the IASB decided to come together and create a short-term and long-term convergence project to attain a better uniform set of accounting standards. Among the efforts are (1) The FASB’s Short-term international convergence Project, (2) the Norwalk Agreement, and (3) the Roadmap to Convergence (Schroeder, Clark, & Cathey, 2011). The short-term convergence project will consist of nine short-term projects. These projects will consist of segment reporting (ISAB), fair-value option, including investment properties (IASB), borrowing cost (IASB), government grants (IASB), impairment (joint), income tax (joint), joint ventures (IASB), research and development (FASB), and subsequent events (FASB) (Hughes & Sander, 2007). FASB has 11 long-term projects that were completed or processed by the end of 2008. The convergence project that was thought to be completed by June 2011 had been pushed back to 2012. Brief History of FASB and IASB The Wheat Committee...
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