Accounting Standards Boards Paper
In 2002, a formal agreement took place to work toward the merging and standardization of international financial reporting rules. The two entities are described in further detail in the following paper along with the progress of the project. This paper also details how the completion of the MSA program prepares students for a professional life within the accounting vocation.
The globalization of the business environment over the last decade has brought about the importance of transnational financial reporting. Users of this information must be able to understand not only the accounting principles used by the company, but the language of the country where ...view middle of the document...
The US, Japan and China are currently working with the IASB in support of convergence and global accounting standards.
The FASB is an American organization based out of Norwalk, CT, and is the designated authority in the private sector for creating and enforcing domestic accounting standards. The US Securities and Exchange Commission (SEC) and the American Institute of Certified Public Accountants (AICPA) officially recognize the FASB standards as authoritative, which governs the preparation of financial reports of all non-government entities (FASB, 2012).
Though the IASB and the FASB have the goal of establishing accounting and financial reporting standards, the FASB focuses on accounting standards in the United States, while the IASB focuses on global standards. Many companies operate businesses globally and the IASB and the FASB work together, with both entities contributing toward global accounting standards.
IASB equivalents for the FASB original pronouncements
The FASB takes an approach based on rule, where the IASB revolves around principle. Both entities agree that convergence would be in the best interest of the financial economy and the following table shows a side-by side view of each entity’s framework:
The FASB’s conceptual framework for financial reporting consists of five Statements of Financial Concepts: | The IASB’s “Framework for the Preparation and Presentation of Financial Statements” consists of six major sections: |
1. SFAC No. 1. “Objectives of Financial Reporting by Business Enterprises” | 1. The objective of financial statements |
2. SFAC No. 2. “Qualitative Characteristics of Accounting Information” | 2. Qualitative characteristics of financial statements |
3. SFAC No. 5. “Recognition and Measurement in Financial Statements of Business Enterprises” | 3. The elements of financial statements |
4. SFAC No. 6. “Elements of Financial Statements” | 4. Recognition of the elements of financial statements |
5. SFAC No. 7. “Using Cash Flow Information and Present Value in Accounting Measurements” | 5. Measurement of the elements of financial statements |
| 6. Concepts of capital and capital maintenance |
(Schroeder et al, 2011)
The IASB focused on a review of the “Framework for the Preparation and Presentation of Financial Statements” in order to further develop its concepts and to also give more guidance in accounting standards. The IASB equivalents of the original pronouncements lie in the definition of assets, liabilities and equity. Also, the IASB framework identifies two elements of the income statement, revenues and gains, and expenses encompassing losses. The FASB shows five areas of the income statement: revenues, expenses, gains, losses, and comprehensive income (Schroeder et al, 2011). This is shown in IAS No. 1, Presentation of Financial Statements, and under...