Relationship Between the Ifrs and the Fasb

Relationship between the IFRS and the FASB Hadassah Moore ACC/541 May 14, 2013 Instructor: Sonja Wilson Relationship between the IFRS and the FASB The principle of accounting dates backs thousands of years to a time where those in positions of governance wanted to make others aware of their growth and progress. Shift forward, and now the principles of accounting have moved towards an interest in investments and creating wealth for all those who hold stock within the company.

This has led to the creation of standards and guidelines by which these accounting principles adhere to, producing financial statements which follow the four qualitative characteristics (reliable, relevant, comparable, and understandable). The Financial Accounting Standards Board (FASB), under the guidance of the Securities Exchange Commission (SEC) established the GAAP which governs US companies with their application of accounting principles to the presentation of their financial statements.The IASB has created the IFRS which serves the same purpose but for the global financial community. A convergence of these two entities began in 2002 with the IASB and FASB coordinating together to produce accounting standards in a world where accounting standards are often amended. With ever-increasing changes in the realm of accounting it becomes important to for those in the profession of accounting to be aware of these changes and the impact they have on the reporting of a company’s financial outlook.

The Masters of Accountancy program is designed to provide a comprehensive background of the creation of the FASB and the IASB, the relationship between their accounting standards, and how their standards measure up to one another. The Convergence of the IASB and the FASB The FASB is the governing body of accounting standards for the United States whereas the IASB is the governing body of accounting standards for the world. The FASB's main purpose is to uphold the GAAP (generally accepted accounting principles), a set of rules and guidelines used to oversee the ormation of financial statements which paint a true picture of a company’s financial position. The IASB's main goal is to develop the international financial reporting standards, a set of principles which provide flexibility in the application of its guidelines based on “the avoidance of complex details and the concentration of basic standards” (Schroeder, Clark, & Cathey, 2011, p.

82). The idea of joining together the two boards of accounting standards is one that has been around since WWII. Initially, efforts were focused on simplifying the number of differences between accounting standards all over the world.Soon after, the idea of convergence, the development of a unified set of high-quality, international accounting standards that would be used in at least all major capital markets” emerged ("International Convergence Of Accounting Standards—a Brief History", n. d).

There has been found a number of similarities and differences between the standards and accounting principles of both boards. “IASB and FASB have agreed to work together to achieve convergence in global accounting standards and financial reporting.The FASB, which pursues a rule-based approach, differs from the IASB's principle based approach in terms of processes, techniques, and organizations” ("The Accounting Standards of Board Essay", 2010). The FASB and the IASB have been working together since 2002 to push forward with a convergence of the GAAP and the IFRS.

The SEC supports the convergence but has not issued a statement regarding whether to incorporate the IFRS into the US financial reporting system ("International Convergence Of Accounting Standards—a Brief History", n. ). The main goal of this convergence is to have companies from different countries use the same standards for reporting the company’s financial position to enhance comparability. This gives investors more information upon which to make an informed decision regarding investments.

“For example, if revenue is measured on an accrual basis by domestic companies but one of the foreign candidates uses a cash basis to report revenue, the results are not comparable.Similarly, if the domestic company expenses research and development expenditures as incurred while the foreign company capitalizes them, there is also a lack of comparability” (Schroeder, Clark, ; Cathey, 2011, p. 95). The many differences found between the two governing bodies will create some difficulty for the convergence, however, there are some similarities which will not have a negative effect on the merge.

Equivalents of IASB and FASB Original Pronouncements Since the release of the convergence project, the IASB has released several pronouncements similar to those presented by the FASB.Some examples included: segment reporting, discontinued operations, and valuation of intangible assets. Segment reporting is addressed in both the IFRS No. 8 and the SFAS No. 131, requiring companies to report information regarding segment profit or loss. Another example is discontinued operations which are addressed in IFRS No.

5 and the SFAS No. 144 which requires the reporting of those operations that have been disposed of. Valuation of tangible assets is discussed in IAS No. 38 and SFAS No. 141 and deals with how a company should recognize the value of intangible assets.

Many equivalents exist and it is important for those in the accounting profession to be aware of these factors and how to gain access to this information. Professional life in accounting after the MSA program. The Master of Accountancy (MSA) program provides its students with the background knowledge needed to perform those duties required of accountants in all sectors, public, private, and within the government. The program also prepares students for understanding the role of accounting in management.Careers in accounting are vast amidst today’s changing global economy and this program focuses on creating a rigorous learning environment where students are able to learn cooperatively with others to meet the various needs of this profession.

A simulation learning environment is the central theme, where students are able to put into practice those concepts learned to display a thorough understanding of the accounting principles and standards necessary for a successful career as a professional accountant.The MSA program also prepares students to sit for the CPA exam, considering the varied requirements from state-to-state. Conclusion The relationship between the FASB and the IASB is rooted in the idea of providing companies with a set of guidelines by which to prepare financial statements for the purpose of providing stakeholders with enough information to make informed decisions in regards to investments. The IASB and the FASB both provide standards by which companies must adhere to when completing financial statements to analyze the financial condition of a company.

The FASB has established the GAAP to guide companies here in the U. S. , and the IASB has created the IAS to govern accounting principles internationally. Both groups are working towards a convergence of the accounting standards they have both set forth for the purpose of developing a set of high quality standards by which the global community can observe. Creating a common goal towards this move, along with the consistent support of the SEC has become a main purpose of the FASB and the IASB.

References Schroeder, R. G. , Clark, M. W. , ; Cathey, J.

M. (2011). Financial Accounting theory and analysis (10th ed. ). Hoboken, NJ: John Wiley ; Sons, Inc..

International Convergence of Accounting standards—a brief history. (n. d). Retrieved from http://www.

fasb. org/jsp/FASB/Page/SectionPage;cid=1176156304264 The Accounting standards of board essay. (2010). Retrieved from http://www.

freeonlineresearchpapers. com/accounting-standards-boards-essay