Accounting Standards Boards Paper
University of Phoenix
Accounting is an ever-evolving field with constantly changing objectives. In this world of accounting, standards need to be set whether they are in the United States or 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 are the International Accounting Standards Board (IASB) and Financial Accounting Standards Board (FASB). The intent of this paper will be to address the relationship ...view middle of the document...
After the Working Party published its Final Recommendations in 1999, and having the IASC approval, a new IASB Constitution took effect from July 1, 2000. The standards-setting body was renamed the International Accounting Standards Board (IASB). It would operate under a new International Accounting Standards Committee Foundation (IASCF, now the IFRS Foundation).
The history of Financial Accounting Standards Board (FASB) begins with the Accounting Principles Board (APB). The APB is the former authoritative body of the American Institute of Certified Public Accountants (AICPA). It was composed of from seventeen to twenty-one members, who were selected primarily from the accounting profession but also included individuals from industry, government, and academia (Schroeder, Clark, & Cathey, 2011). Due to the many doubts and the growing criticism of the APB, the board of directors of the AICPA appointed two committees. The Wheat Committee and The Trueblood Committee. The Wheat Committee issued its report in 1972 recommending that the APB be eliminated and the Financial Accounting Standards Board (FASB) be created (Schroeder et al., 2011).
International convergence of accounting standards is not a new idea. The idea of convergence was first brought up in the late 1950s due to the post World War II economic integration and related increases in cross-border capital flows (International Convergence–A Brief History, 2014). Since 2002, the FASB and IASB have been working together to improve and converge U.S. generally accepted accounting principles (GAAP) and international financial reporting standards (IFRS). The FASB’s mission is to improve U.S. financial accounting standards for the benefit of present and potential investors, lenders, donors, creditors, and other users of financial statements (International Convergence–Overview, 2014). The FASB believes that by bringing forward convergence and making global accounting standards as similar as possible, it will accomplish their goals. Not only will investors, companies, auditors, and other participants in the U.S. financial reporting system benefit from the increased comparability, but it would also reduce the cost to both users and preparers of financial statements. Additionally, it will also make worldwide capital markets more effective (International Convergence–Overview, 2014).
The FASB and the IASB have been working together formally towards the convergence project since 2002. During the past ten years, the FASB and IASB collaborated through joint projects to develop common standards (International Convergence–Overview, 2014). The FASB has issued those standards as U.S. GAAP and the IASB has issued them as IFRS. Over time, the two sets of standards are expected to both improve in quality and become increasingly similar (International Convergence–Overview, 2014). The remaining four joint projects are: revenue recognition; financial instruments; leases; and insurance.