Accounting Standards Board Paper
ACC/541 University of Phoenix
April 6, 2015
The IASB and the FASB
The International Accounting Standards Board (IASB) is operated in the private sector as an independent body developing and approving International Financial Reporting Standards. ("Ias Plus", 2015) Much like our nemesis The Financial Accounting Standards Board (FASB) is also operated in the private sector as to establish standards of financial accounting which govern organizations financial reporting since 1973. Their standards are recognized by both the American Institute of Certified Public Accountants and the Securities and Exchange Commission (SEC). ...view middle of the document...
It was in October of 2002 that a memorandum was issued by the FASB and the IASB which is said to have marked a significant toward their commitment to the convergence of both the U.S. and international accounting standards. This memorandum named the Norwalk Agreement although a major step toward globalized standards; however, there are many differences of opinion to overcome in order for these standards to be agreed upon and rolled out for all to follow. Six years later they decided to form a group to address these differences in the reporting process which arose during the global financial crisis; named the Financial Crisis Advisory Group. They were to consider how improving financial reporting in order to build the confidence in future and current investors. (Burnet, 2013)
In July of 2009 weaknesses were identified in accounting standards and their application. The consensus was that this included for the majority delayed recognition of losses when associated with loans that utilize structured credit products; generally used by banks, other financial institution and insurance companies. Two years later they published a joint proposal called the three bucket impairment model. Divergence of the two boards did not happen until 2012 when the FASB had concerns about this model, stating that is was too complicated to be understood or interpreted. Also, later that year FASB issued another model named as the credit deterioration model that proposed recognition of expected credit loss on financial instruments. (Burnet, 2013)
FASB seeks greater comparability by accomplishing the following three items:
“As we conclude the bilateral convergence program begun in 2002 by the FASB and the International Accounting Standards Board (IASB), the FASB has implemented a three-part strategy for seeking greater comparability in accounting standards internationally:
1. Developing high-quality GAAP standards
2. Actively participating in the development of International Financial Reporting Standards (IFRS)
3. Enhancing relationships and communications with other national standards setters.” (Comparability in International Accounting Standards-An Overview)
Even though FASB has been striving to achieve greater comparability since 2000, it has realized that there are challenges on an international level. “The convergence has increased the quality of reporting standards and enhanced the comparability of these standards in a number of important areas, including the accounting for business combinations, share-based payment transactions, fair value measurement, and revenue recognition.” (Comparability in International Accounting Standards-An Overview) These changes cannot happen on the FASB own, and it is not an easy task. There are many obstacles in their way, such as, different money, cultures, legalities or regulatory environments. ("Fasb", n.d.)
There are several differences between the...