Financial accounting is influenced by the environment in which it operates. Nations have different histories, values, cultures, political and economic systems and they are also in various stages of economic development. These national influences interact with each other and, in turn, influence the development and application of financial accounting practices and reporting procedures (Schroeder, Clark, & Cathey, 2005).
Financial statements are currently evaluated by end users who span the globe. As the economies of the world merge and are no longer separated by international borders, stakeholders are becoming more sophisticated and versed in the global economies. However, the financial ...view middle of the document...
The International Accounting Standards Board is an independent, privately funded accounting standard-setter based in London, UK. The Board members come from nine countries and have a variety of functional backgrounds. The IASB is committed to developing, in the public interest, a single set of high quality, understandable and enforceable global accounting standards that require transparent and comparable information in general purpose financial statements (Internation Accounting Standards Board ). The International Accounting Standards Board (IASB) was founded on April 1, 2001 as the descendant to the International Accounting Standards Committee (IASC), which operated from 1973 until 2001. The IASB is responsible for developing International Financial Reporting Standards (IFRS), and promoting the use and application of these standards.
The FASB and the IASB held a joint meeting in Norwalk, Connecticut, on November 18, 2002. Both standards-setting bodies acknowledged their commitment to the development of high-quality compatible accounting standards that can be used for both domestic and cross-border financial reporting. In this agreement they agreed to work together, and to accept the best standard from either organization. If it is determined between the two boards that neither of them have a standard that can be adopted; then an entirely fresh standard will be created (Gornik-Tomaszewski, 2003).
To this end, both Boards agreed to:
• Undertake a short-term project aimed at removing a variety of differences between U.S. GAAP and IFRSs.
• Remove any other differences between IFRSs and U.S. GAAP that remained on January 1, 2005, by undertaking projects that both Boards would address concurrently.
• To continue the progress on the joint projects currently underway.
• Encourage their respective interpretative bodies to coordinate their activities.
The 2002 Norwalk Agreement describes the FASB and IASB plans for achieving the goal, such as coordinating the agendas of both Boards so all major projects are undertaken jointly and eliminating narrow differences in other standards through focused, short-term convergence initiatives.
The FASB has undertaken the following six key initiatives to further the goal of convergence of U.S. GAAP with International Financial Reporting Standards (IFRS).
• Joint projects being conducted with the IASB. Joint projects are those that standard setters have agreed to conduct simultaneously in a coordinated manner. Joint projects involve sharing staff resources, and every effort is made to keep joint projects on a similar time schedule at each Board. Current joint projects address Revenue Recognition and Business Combinations.
• The short-term convergence project. The short-term convergence project is an active agenda project being conducted jointly with the IASB, and it is expected to result in one or more standards that will achieve convergence in certain areas. The scope of the short-term convergence...