This paper looks at a brief history of the two accounting standard setters in the world, looks at what the standard setters are planning to do to converge into universal international accounting standards, and explains how taking this class as part of the

University Degree Business and Administrative studies

IASB and FASB

Accounting Standards Boards Paper

Bridget Burns

ACC/541 Accounting Theory & Research

Marina Layvand

June 19, 2011

“Capital-seeking firms must reconcile their financial statements to the accounting rules of the nation in which they are seeking capital, and investors must identify foreign reporting differences ( This is because nations have their own accounting standards. If there is one worldwide uniform set of international accounting standards, then the reconciliation would not longer be needed. This paper looks at a brief history of the two accounting standard setters in the world, looks at what the standard setters are planning to do to converge into universal international accounting standards, and explains how taking this class as part of the MBA with accounting option prepares a student for a professional life with accounting aspects.

Brief History

Two accounting standard setters exist. The two groups establish generally accepted accounting principles (GAAP). The Financial Accounting Standards Board (FASB) is the accounting standard setter for the United States. The other standard setter is the International Accounting Standards Board (IASB) in much of the rest of the world.

“The FASB, consists of seven full-time members, is an independent creation of the private sector (”. FASB is financially supported by various companies and professional accounting associations. The IASB is an independent organization whose pronouncements define GAAP in the European Union and many other countries.

“The FASB’s mission is to establish and improve standards of financial accounting and reporting for the guidance and education of the public, including issuers, auditors, and users of financial information (FASB seeks to improve financial reporting and its usefulness, to keep standards current with the times, to consider areas of deficiency in financial reporting, to promote comparability of accounting standards worldwide, and to improve the understanding to information in financial reports.

Over the years there had been many groups that had created standard setting processes. This caused a problem when researching an issue for one does not know where ...

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Over the years there had been many groups that had created standard setting processes. This caused a problem when researching an issue for one does not know where to look. The FASB took on a project to codify the processes into one authoritative codification. The codification represents the only official source of U.S. GAAP. Creating one source will allow the FASB to isolate the differences in the convergence project with international accounting standards.

The IASB has no enforcement authority and relies on its members to follow. Neither the FASB nor the SEC is a member of the IASB, so its standards have no authority in the United States. A movement is underway to have IASB standards become the GAAP for U. S. companies because of a need for the increased harmonization of worldwide accounting standards.

Convergence Project

The FASB is partnering with the IASB to create a convergence between the national accounting standards and the international accounting standards. “The goal of this convergence is for enterprises in all countries to report high-quality, transparent, and comparable information that will help participants in capital markets and others make economic decisions (”. The convergence needs to be able to create a worldwide accounting standard.

The FASB and IASB are currently working together on joint ventures to obtain a uniform set of international accounting standards. The joint ventures are called the FASB’s Short-term International Convergence Project and Roadmap to Convergence. The goals of the projects are to bring U. S. GAAP and International Financial Reporting Standards (IFRS) together by eliminating differences as well as arriving at a common set of global standards. “Differences that are associated with issues requiring comprehensive reconsideration were not addressed by the short-term convergence project and will be addressed over a longer term in the Roadmap to Convergence project (”.

The FASB’s Short-term International Convergence Project works on bringing together U. S. GAAP and International Financial Reporting Standards (IRFS) by removing the differences. “The FASB intends to analyze each of the differences within the scope and either (1) amend applicable U.S. GAAP literature to reduce or eliminate the difference or (2) communicate to the IASB the Board’s rationale for electing not to change U.S. GAAP (”. The IASB will do the same by reviewing the IFRS and decided whether to make changes to the IFRS or to notify the FASB why the change is not made. The removal of the differences between U. S. GAAP and IFRS were to be completed by January 1, 2005.

The Roadmap to Convergence will address long-term issues by arriving at a common set of global standards. The roadmap included seven milestones that include: improving accounting standards; funding of an International Accounting Standards Committee Foundation; improve ability to use interactive data for IFRS reporting; improve education and training in the United States; limit use to a small group of companies; SEC determination if mandatory adoption of IFRS is feasible; and mandatory use. The desired object is to have companies in different countries use the same accounting procedures to measure and report their finances. This roadmap will lead to the use of IFRS by the United States issuers in 2014.

Class Prepares for Professional Life

This class is an option to take for the MBA with accounting option. In this class, students learn about accounting research and how to apply accounting research tools to accounting issues. Some of the accounting issues covered in this class is questions related to inventory, fixed assets, debt, segment reporting, pensions, and stockholder’s equity. Learning where to find accounting research tools and how to research on these tools will help a student keep up-to-date with any changes to the accounting standards so the student can perform the accounting topic correctly.

This paper looked at a brief history of the two accounting standard setters in the world, looked at what the standard setters are planning to do to converge into universal international accounting standards, and explained how taking this class as part of the MBA with accounting option prepares a student for a professional life with accounting aspects. The FASB and IASB are two of the accounting standards setters. The two setters are working together on a convergence project to create one worldwide accounting standard. This class helps a student learn about accounting research that will be extremely important to know how to perform accounting research in a professional life within the accounting world.

References