IASB And FASB Convergence Project
IASB and FASB Convergence Project
To compete in a global economy with the emergence of multinational corporations financial reporting requires operators to understand the accounting practices used by the company, the language of the country in which the company exists, and the currency utilized by the corporation to prepare its financial statements and in turn to attract investors and creditors to invest in or lend money to companies. To harmonize accounting standards among countries, The International Accounting Standards Board (IASB) and the Financial Accounting Standards Board (FASB) are currently working on a joint venture known as the convergence project pronounce in 2002 (Schroeder, Clark, & Cathey, 2011).
The International Accounting Standards Committee was formed in 1973 as the first international standards settlers and becoming an independent international standards settler in 2001. Since 1973 the Financial Accounting Standards Board (FASB) has been designated for the establishments of financial accounting that regulates the preparation of financial reports by non-governmental entities. Those standards are identified as authoritative by the Securities and Exchange Commission (SEC) …show more content…
who has statutory authority to institute financial accounting and reporting standards for publicly held companies under the Securities Exchange Act of 1934. However, the Commission’s policy relies on the private sector for this function to the extent that the private sector demonstrates ability to satisfy the responsibility in the public interest (Facts about FASB, n.d.) . Both the FASB and IASB have been working together to improve and converge US generally accepted accounting principles (GAAP) and IFRS. As of 2013, Japan and China were also working to converge their standards with IFRSs. Here are some of the key events in the evolution of the international convergence of accounting standards: In the 1960s early steps of International Standards. In the 1970s and 1980s an International Standard-Setting Body takes root. In the 1990s the FASB formalizes and expands its international activities. In the 2000s The Pace of Convergence Accelerates the use of International Standards grows rapidly, the FASB and IASB formally collaborate and the US explores adopting International Accounting Standards (fasb.org, n.d.).
IASB equivalents of the FASB original pronouncements
Subsequently the signing of the Norwalk Agreement, a memorandum of understanding in 2002 between the FASB and the IASB so called as it was reached in Norwalk, the IASB released several pronouncements similar to those issued by FASB. Statements of Financial Accounting Concepts and Statements of Financial Accounting Standards are issued by FASB while International Accounting Standards and International Financial Reporting Standards are either issued or validated by IASB. Standards addressing segment profit and loss, certain revenues and expenses, segment assets and the basis of measurement, as well as the disclosure of total liabilities of its reportable segments (Spiceland, 2011).
Both the FASB and the IASB agreed to remove a variety of differences between U.S.
GAAP and IFRSs by undertaking projects that both boards would address contemporaneously with the encouragement of the respective bodies to coordinate the activities and also its progress. The goal of the project was to attain compatibility by identifying common high-quality results. In 2008 the guidelines to lead to the use of International Financial Reporting Standards by US issuers beginning in 2014 include milestones such as the improvement of accounting standards, funding of the International Accounting Standards Committee Foundation, improved ability to use interactive data for IFRS reporting, improved education and training in the United States (Schroeder, Clark, & Cathey,
2011).
The impact of international versus U.S. GAAP accounting standards raised matters of discussion as to whether if foreign companies should be allow to list their securities on US stock exchanges under international accounting rules. Previously, foreign companies seeking to list on a U.S. stock exchange must have recast their financial statements to reflect then-current GAAP by filing Form 20-F with the SEC within six months of the company’s fiscal year-end. One study found mixed evidence in that form 20-F reconciliation was found to be value relevant and IAS and U.S. GAAP earnings amounts were valued differently by the marketplace with the exception of valued earnings per share amounted differently.
In 2007, the SEC also took measures in direction of convergence when deciding to explore the possibility of allowing US companies to adopt FRS with the rationale that movement to IFRS had begun to affect US companies under the new rule form 20-F foreign registrants could use either U.S. GAAP or IFRS without reconciling their earnings and shareholders’ equity to US GAAP. Standards for smaller and medium-sized businesses have been a concern as a result the IASB published an IFRS designated for these type of business entities (SMEs) aiming to provide a simplified set of accounting principles. U.S Companies will need to check with their state boards of accountancy to determine the status of reporting on financial statements prepared in accordance with IFRS for SMEs.
The general purpose of financial statements is to provide information about the financial position, performance useful to a variety of users making economic decisions, but they do not provide all information needed to make economic decisions because they provide past information and do not provide nonfinancial information. A framework was established to facilitate a general purpose to be understandable, relevant, reliable and comparable and including financial effects of transactions grouped to measure financial position in the balance sheet such as assets, liabilities and equity and measurements of performance in the income statement as income and expenses (Schroeder, Clark, & Cathey, 2011).
Both boards continue to revise and implement projects to build on their existing frameworks to be principle based, sound, comprehensive and internally consistent, a challenge their members face and the professionals in the field in following procedure and at the same time disclosing as much relevant information to the public in this growing economy for many business purposes. One is glad that the MSA program at University of Phoenix offered this educative class on international business and what it entails. Specializing in the international business is a must due to the growing economy. Today, not only large companies compete internationally but small businesses and sole proprietors as well. This course definitely provided abundant guidance.
References
Facts about FASB. (n.d.). Retrieved from http://fasb.org
Schroeder, R. G., Clark, M. W., & Cathey, J. M. (2011). Financial Accounting Theory and Analysis. (10th ed.). Noboken, NJ: John Wiley & Sons Inc..
Spiceland, D. (2011, August 25). IASB Equivalents to FASB Pronouncements. Retrieved from http://accountingnoteshelp.com fasb.org. (n.d.). International Convergence of Accounting Standards - A Brief History.. Retrieved from http://fasb.org
To compete in a global economy with the emergence of multinational corporations financial reporting requires operators to understand the accounting practices used by the company, the language of the country in which the company exists, and the currency utilized by the corporation to prepare its financial statements and in turn to attract investors and creditors to invest in or lend money to companies. To harmonize accounting standards among countries, The International Accounting Standards Board (IASB) and the Financial Accounting Standards Board (FASB) are currently working on a joint venture known as the convergence project pronounce in 2002 (Schroeder, Clark, & Cathey, 2011).
The International Accounting Standards Committee was formed in 1973 as the first international standards settlers and becoming an independent international standards settler in 2001. Since 1973 the Financial Accounting Standards Board (FASB) has been designated for the establishments of financial accounting that regulates the preparation of financial reports by non-governmental entities. Those standards are identified as authoritative by the Securities and Exchange Commission (SEC) …show more content…
who has statutory authority to institute financial accounting and reporting standards for publicly held companies under the Securities Exchange Act of 1934. However, the Commission’s policy relies on the private sector for this function to the extent that the private sector demonstrates ability to satisfy the responsibility in the public interest (Facts about FASB, n.d.) . Both the FASB and IASB have been working together to improve and converge US generally accepted accounting principles (GAAP) and IFRS. As of 2013, Japan and China were also working to converge their standards with IFRSs. Here are some of the key events in the evolution of the international convergence of accounting standards: In the 1960s early steps of International Standards. In the 1970s and 1980s an International Standard-Setting Body takes root. In the 1990s the FASB formalizes and expands its international activities. In the 2000s The Pace of Convergence Accelerates the use of International Standards grows rapidly, the FASB and IASB formally collaborate and the US explores adopting International Accounting Standards (fasb.org, n.d.).
IASB equivalents of the FASB original pronouncements
Subsequently the signing of the Norwalk Agreement, a memorandum of understanding in 2002 between the FASB and the IASB so called as it was reached in Norwalk, the IASB released several pronouncements similar to those issued by FASB. Statements of Financial Accounting Concepts and Statements of Financial Accounting Standards are issued by FASB while International Accounting Standards and International Financial Reporting Standards are either issued or validated by IASB. Standards addressing segment profit and loss, certain revenues and expenses, segment assets and the basis of measurement, as well as the disclosure of total liabilities of its reportable segments (Spiceland, 2011).
Both the FASB and the IASB agreed to remove a variety of differences between U.S.
GAAP and IFRSs by undertaking projects that both boards would address contemporaneously with the encouragement of the respective bodies to coordinate the activities and also its progress. The goal of the project was to attain compatibility by identifying common high-quality results. In 2008 the guidelines to lead to the use of International Financial Reporting Standards by US issuers beginning in 2014 include milestones such as the improvement of accounting standards, funding of the International Accounting Standards Committee Foundation, improved ability to use interactive data for IFRS reporting, improved education and training in the United States (Schroeder, Clark, & Cathey,
2011).
The impact of international versus U.S. GAAP accounting standards raised matters of discussion as to whether if foreign companies should be allow to list their securities on US stock exchanges under international accounting rules. Previously, foreign companies seeking to list on a U.S. stock exchange must have recast their financial statements to reflect then-current GAAP by filing Form 20-F with the SEC within six months of the company’s fiscal year-end. One study found mixed evidence in that form 20-F reconciliation was found to be value relevant and IAS and U.S. GAAP earnings amounts were valued differently by the marketplace with the exception of valued earnings per share amounted differently.
In 2007, the SEC also took measures in direction of convergence when deciding to explore the possibility of allowing US companies to adopt FRS with the rationale that movement to IFRS had begun to affect US companies under the new rule form 20-F foreign registrants could use either U.S. GAAP or IFRS without reconciling their earnings and shareholders’ equity to US GAAP. Standards for smaller and medium-sized businesses have been a concern as a result the IASB published an IFRS designated for these type of business entities (SMEs) aiming to provide a simplified set of accounting principles. U.S Companies will need to check with their state boards of accountancy to determine the status of reporting on financial statements prepared in accordance with IFRS for SMEs.
The general purpose of financial statements is to provide information about the financial position, performance useful to a variety of users making economic decisions, but they do not provide all information needed to make economic decisions because they provide past information and do not provide nonfinancial information. A framework was established to facilitate a general purpose to be understandable, relevant, reliable and comparable and including financial effects of transactions grouped to measure financial position in the balance sheet such as assets, liabilities and equity and measurements of performance in the income statement as income and expenses (Schroeder, Clark, & Cathey, 2011).
Both boards continue to revise and implement projects to build on their existing frameworks to be principle based, sound, comprehensive and internally consistent, a challenge their members face and the professionals in the field in following procedure and at the same time disclosing as much relevant information to the public in this growing economy for many business purposes. One is glad that the MSA program at University of Phoenix offered this educative class on international business and what it entails. Specializing in the international business is a must due to the growing economy. Today, not only large companies compete internationally but small businesses and sole proprietors as well. This course definitely provided abundant guidance.
References
Facts about FASB. (n.d.). Retrieved from http://fasb.org
Schroeder, R. G., Clark, M. W., & Cathey, J. M. (2011). Financial Accounting Theory and Analysis. (10th ed.). Noboken, NJ: John Wiley & Sons Inc..
Spiceland, D. (2011, August 25). IASB Equivalents to FASB Pronouncements. Retrieved from http://accountingnoteshelp.com fasb.org. (n.d.). International Convergence of Accounting Standards - A Brief History.. Retrieved from http://fasb.org