ACCOUNTING STANDARDS BOARDS

Accounting Standards Boards

Accounting Standards Boards

Introduction

The course of the study will focus on the convergence between the two accounting standards boards, International Accounting Standards Board (IASB) and the Financial Accounting Standards Board (FASB). The study will also discuss the historical background between the two boards and the IASB equivalents of the FASB original pronouncements. In 2002, the FASB and the IASB (international Accounting Standards Board officially announced the memorandum of understanding by making a momentous step of formalizing their pledge to the convergence of United States and international accounting standards. IASB is responsible for setting standards for IFRS, IFRS uses FASB pronouncements and principles based approach. Both the accounting standard boards follow the same standards for accounting but, the approaches may differ in each board.

Discussion

The convergence of the two international accounting standards board is not a newly coined idea. The concept of the convergence was first raised in the 1950's in response to the economic conditions and integration and related cross border flows of capital after the World War II. The initial efforts made in this regard concentrated on harmonization and eliminating differences between the accounting principles followed by the major capital markets throughout the world (Donald et al, 2011). In the 1990's concept and the notion for the harmonization of the accounting standards was replaced by the convergence. One of the significant factors that derived the process was “Globalization and WTO”.

The development and evolution of a single set of high quality internal accounting standards were necessary in order to enable smooth flow of trade globally. The first international accounting standards setting standards body was formed in the year which was named “the international accounting standards committee” (Richard et al, 2010). The committee was reorganized in the year 2001, and became an independent body and given the name (IASB) for setting international accounting standards. Since, the inception of (IASB) the progress in the international accounting standards have fasten and more than hundred countries including European union permit or either require the use of (IFRSs) international financial reporting standards which are an issue by the international accounting standards board or a local representative of the board.

The IASB and the FACB have been working in coalition with each other since 2002 to converge and improve United States (GAAP) generally accepted accounting principles and (IFRSs). The objective of the proposed convergence framework is to create a solid foundation for future standards based accounting principles, internal consistency and convergence to international level. Since 2009, both china and Japan have also started to congregate their accounting standards with (IFRSs). And, in 2010 the (SEC) Securities and Exchange Commission issued a stamen that supports the convergence of international accounting standards.

In their official statements of the FASB and IASB seek, therefore, the economic benefits that should speak for closer cooperation: the forehand progressive integration of capital markets, which makes a consistent reporting system, is required (Kluwer, 2008). Regardless of whether macroeconomic-oriented cost-benefit considerations in the convergence agreement now have a vital role played or not, ...