Accounting Standards Boards Essay Example | Topics and Well Written Essays - 1000 words

Accounting Standards Boards - Essay Example This convergence was done in order to improve the two main US accounting principles i.e. IFRA and GAAP. China and Japan also worked in this coverage of two boards. In accordance with the 2010 reports, the Securities and Exchange Commission’s have issued a statement of global accounting standard and convergence in order to direct the SEC staff. This was done to make a work plan which should be used to incorporate IFRA standards in US financial reporting system (Colson, Robert H, 2003, p.22). A brief history on the relationship of these two boards is described below: Interest of international accounting began in 1950s due to the integration of World War II and due to the increase of capital flaws in the systems. An international congress of accountant was hosted by American Institute of Certified Public Accountants in 1962. It discussed the steps for the development of accounting, auditing and other reporting standards. The first textbook of international accounting was publishe d in 1967 which was written by a member of FASB. IASB and FASB relationship was informal one. But in 1988 FASB became a member of IASC which meant that FASB was able to participate in the meetings of IASC. In 1993 FASB and its counter party conducted a joint venture project. This resulted in the improvement of in the relationship and standards of these two boards. In 2000 use of international accounting standards increased rapidly due to which IASB and FASB decided to collaborate and explore US international standards. IASB and FASB finally decided to collaborate and work together in order to improve the US accounting standards. This partnership has been mentioned in â€Å"The Norwalk Agreement.† A memorandum of understanding was issued by both of the boards in 2006. It described the targeted performance they hope to achieve by 2008. In this MOA they shared their common objective with high quality accounting standards. Both the boards completed the first joint project and iss ued a converged accounting standard on business combination in 2007. FASB and IASB updated its memorandum of understanding in 2008 in order to establish convergence goals of 2011. FASB reported the status of their project in order to converge and improve UC GAAP accounting standards in 2010. First quarter congress report was issued by both the boards which reported modification of their joint work plan. A progress report was issued by both the boards in 2011. It reported the progress of the convergence work program. In this report it gave priority to the three main areas i.e. leasing, financial instrument and revenue recognition. 1.2 IASB equivalents of the FASB original pronouncements FASB and IASB mainly establish standards in relation to finance and accounting which helps nongovernmental organizations to prepare financial statements. FASB major pronouncement is to develop the principles of general accounting, while IASB focuses on international financial reporting analysis. This indicates that IASB is not equivalent of the pronouncements of the other board. There exists difference in the practices of both the boards. FASB uses a rule based approach, which differs from the principles of IASB; it focuses on techniques, processes and organization. In spite of these differences in the original pronouncement, both the boards have agreed to converge for the best interest of financial economy. This means that the main reason of the convergence was to set universal standards of accounting. In order to reduce these differences meetings were conducted by auditors to ensure the success of both the boar