IASB And FASB Convergence Of IFRS

IASB and FASB Convergence to develop IFRS: An Overview

The USA exercises great influence on the existing accounting standards all over the world. The USA espouses the Financial Accounting Standards Board (FASB), which has set forth many standards that are applied by the international accounting standards boards. On the other hand, the rest of the countries of the world follow the International Accounting Standards Board (IASB), which is designed to realize convergence in accounting standards globally (IASB international, 2010) to develop International Financial Reporting Standards.

In 2001, an outline was approved by the IASB to offer direction in creating accounting standards. The outline has 4 main objectives, namely 1) defining the aims and objectives of financial statements 2) identification of features that create useful information 3) explaining the basic facts of financial statements and 4) and offering theories of capital maintenance.

Objectives

The objectives of financial statements are to offer data on financial position, variations in financial position, and the organization’s financial outlook (The IASB framework, 2008).

The outline keeps two key presumptions regarding International Financial Reporting Standards (IFRS). Firstly, it is the on accrual basis, which considers that a transaction would be documented when it happened, not when the cash from that transaction is obtained. Secondly, it presumes that a company or business organization would sustain in the near future.

For several years, many countries of the world have had its own set of accounting standards and norms; nevertheless, in view of the fact many organizations turned global, the workload to report financial statements increased significantly. Not on...

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...t the FASB and the IASB converge on standards that would be best fit for the US economy as well the companies.

Indeed, the IASB has some accounting aspects in common with FASB; nevertheless, there exist more dissimilarities than similarities. GAAP and IFRS both offer remarkable accounting principles; nevertheless, the USA should continue to follow GAAP and continue to have GAAP created by the FASB.

The US companies are not expected to fully approve IFRS or the IASB, since it eliminates their control over financial standards globally and IFRS has the accounting standards that are quite different from the US standards upon which many decisions in the country have been made. Though, the SEC try to converge both the Boards and the concepts, the disparities between the two imply that it may take few years to set up a standard accounting Board that the USA would approve.