Accounting Standard Board Paper
June 18, 2012
Accounting Standard Board Paper
In the world of accounting there needs to be standards for all of the countries, whether they are in the United States of Overseas. The accounting boards will help with making sure that all of the information is done correctly and are reported in a consistent way so that investors can determine what company is better to invest in. The two types of accounting standards board that are being discussed is the International Accounting Standard Board (IASB) and Financial Accounting Standard Board (FASB). The first thing that needs to be discussed is the history of the two boards. The history will explain ...view middle of the document...
In 2002, the Sarbanes-Oxley Act says that the FASB be financed by publicly traded companies, instead of interested parties of the private sector (Schroeder, Clark, & Cathey, 2011). The reason that Sarbanes-Oxley Act suggested this for the FASB was so the FASB had more independence from constituents they served (Schroeder, Clark, & Cathey, 2011). In 1996, there was a concern from the SEC that the FAF’s public interest objectives were at risk (Schroeder, Clark, & Cathey, 2011). The chairman of the SEC suggested that the FAF be reorganized to consist of individuals that have strong public service backgrounds which are able to represent the public with no conflict of interest (Schroeder, Clark, & Cathey, 2011). At that time the SEC became the one to approve the members of the FAF.
After the announcement from the SEC being in charge of appointing member to the FASB, the FASB decided to come up with a mission statement that would “establish and improve standards of the financial accounting and reporting for the guidance and education of the public, including issuers, auditors, and users of financial information (Schroeder, Clark, & Cathey, 2011, p 11).
“1. Improve the usefulness of financial reporting by focusing on the primary characteristics of relevance and reliability and on the qualities of comparability
2. Keep standards current to reflect changes in methods of doing business and
changes in the economic environment
3. Consider promptly any significant areas of deficiency in financial reporting
that might be improved through the standard-setting process
4. Promote the international comparability of accounting standards concurrent
with improving the quality of financial reporting
5. Improve the common understanding of the nature and purposes of information contained in financial reports” (Schroeder, Clark, & Cathey, 2011, p 11).
After the mission statement was established the FASB made two types of pronouncements which are Statements of Financial Accounting Standards (SFASs) and Interpretations. Then the FASB decided that there were two more that needed to be established which are the Statements of Financial Accounting Concepts (SFACs) and Technical Bulletins. The FASB has established seven SFACs which are intended to “establish objectives an concepts that the FASB will use to develop standards of financial accounting and reporting” (Schroeder, Clark, & Cathey, 2011, p 11).
In 1990, the United States (US) decided to emerge with the international accounting standards due to the US companies have large amounts of revenue and profits in the foreign markets. The International Accounting Standards Board (IASB) was established in 1973 to achieve the purpose of harmonizing the international accounting standards (Schroeder, Clark, & Cathey, 2011). The companies that are in need of capital or investments are looking at cost and time issues, because these companies have to redo their...