International accounting is heading to one global accounting standard; IASB and FASB are coordinating together to produce accounting standards. There are positively lots of advantages by introducing one global accounting standard. The method of introducing one global accounting standard is complicated, as it engages many governments, investors, and companies, but it also involves the countries’ social development and culture, which can offer enormous change. This paper will describe the IASB and the FASB relationship including a brief history of both boards and the IASB equivalents of the FASB original pronouncements. This paper will also discuss the student MSA program preparation for a professional life within the accounting profession.
The IASB and the FASB relationship
The FASB is the accounting standards board of the United States whereas the IASB is the International accounting standards board. The FASB’s major purpose is to develop the GAAP (generally accepted accounting principles). The IASB’s major purpose is to develop the international financial reporting standards.
There are numerous differences between the standards and accounting principles of both boards. They are working together to develop global accounting standards. 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.
Convergence between IFRSs and US GAAP
The IASB’s IFRS pronounces principle-based standard that do not provide adequate attention to specific application guidance. On the other hand, the FASB’s GAAP focuses on rule based standards that accompany or pay attention to a specific guidance. Both IASB’s IFRS and FASB’s GAAP address requirements pertaining to financial statements determined to be important to a wide range of economic decision makers. Both sets of standards put emphasis on balance sheets, income statements, cash flow statements, and statement of changes in equity as key reports that are significant to construct sufficient evaluation for making important decisions. Both sets of standards address notes to the financial statements, supplementary schedules as well as the underlying assumptions, and qualitative characteristics of the financial statements.
The IASB and FASB agreed to the improvement of high quality and compatible accounting standards that may well be implemented for both cross-border and domestic financial reporting. The goal is to apply existing and continuous financial reporting standards totally compatible. After several meeting in 2005 both boards reaffirmed their obligation to the convergence project (iasb, 2005).
Several efforts have been made toward the convergence project since these commitments. Achieving the objectives established by the boards and research for this project will depend heavily on the assistance from auditors, investors, standard-setters, companies, and regulators. The project includes key initiatives that would advance the goals of the two financial accounting boards. The convergence project board members are determined to first identify the differences between the United States General Accepted Accounting Principles (GAAP) and the International Financial Reporting Standards (IFRS). The board will address whether a resolution can increase the convergence standards. Each current topic must collaborate with the resources and standard setters of the FASB. A key component of the project involves the reporting of the financial performance and identification of the accounting for the stock-based compensation. (Schroeder, Clark, Cathey, 2005)
The global economy has matured toward cross-border investing and capital flows. The current financial reporting crisis in the United States urges the need to develop better accounting standards that should be developed to be acceptable internationally. Companies seeking capital or investment opportunities across national boundaries face cost and time issues. These firms must reconcile their financial statements to the accounting rules of the nation. The two boards have developed standards that will improve the efficiency of global capital markets by lowering cost of capital, improving comparability, and enhancing corporate governance. (Schroeder, Clark, Cathey, 2005) The objective of the established goals provides a time frame for the convergence efforts in the context of removing the need of the agreement between the boards. The goals of the Board’s active agenda were to be completed by 2008 included:
• Business Combination
• Consolidation
• Fair Value Measurements Guidance
• Liabilities and Equity Distinctions
• Performance Reporting
• Post-Retirement Benefits
• Revenue Recognition
Some other topics to be researched but have not been added to the agenda included
• Financial Instrument (replacing of existing standards)
• Intangible Assets
• Leases
Equivalents of IASB and FASB Original Pronouncements
Several differences can be compared between the FASB original pronouncements and the IASB pronouncement. Difference exists because of time, standards, program goals, alternatives, or related guidance that may be required by IASB but not required by the FASB. The purpose of understanding the difference or equivalence will relate to the understanding of the challenges that the boards will encounter in the convergence project. A similar set of high quality global standard is the long-term strategy for both the FASB and the IASB. Below are the revised pronouncements used by the FASB (fasb, 2008).
1. Statement of Financial Accounting Concepts – releases designed to establish the fundamentals on which financial accounting standards are based.
2. Statement of Financial Accounting Standards – releases indicating required accounting methods and procedures for specific accounting issues.
3. Interpretations – Modification or extensions of issues related to FASB.
4. Technical Bulletins – guidance on accounting and reporting problems issued by the staff of the FASB. (Schroeder, Clark, Cathey, 2005).
Professional Life after the MSA Program
A master of accountancy (MSA) degree enhances the knowledge of a person whom may have an undergraduate degree in business or another program. The MSA program can be used to enhance knowledge in accounting allowing the student to learn with practical business issues in a simulated environment. The program allows deep interactions with other individuals in learning the appropriate solutions to problems and issues in the world of accounting and finance. The MSA program is focused on providing students with the recent and historical perspectives on the various aspects of accounting. In addition, the program meets the expectations of the National Association of State Boards of Accountancy (NASBA) proposed education model. Although each state has different rules to meet the requirements for the Certified Public Accountant (CPA) exam the program is designed to meet most of the requirements for the exam. The MSA program is designed to prepare students for the CPA exam and various professional careers in accounting.
Conclusion
This paper has briefly discussed the IASB and FASB, their relationship, history, current projects, and the equivalents of original pronouncements. These two groups are dedicated to the convergence of accounting standards that can be achieved through the development of high quality and common standards. Through the consistency of the established guideline assistance from the SEC and the European Commission, the FASB and IASB are working toward achieving common goals.
References
Schroeder, R.G., Clark, MW. & Cathey, J.M. (2005). Financial accounting theory and analysis: Text readings and cases (8thed). Retrieved March 29, 2010, from University of Phoenix
https://ecampus.phoenix.edu/content/eBookLibrary/content/eRearch.h.
Financial Accounting Standards Board. (2008). the financial accounting standards codification. Retrieved March 29, 2010, from
http://www.fasb.org/st/
International Accounting Standards Board. (2008) Joint IASB/ FASB project. Retrieved March 29, 2010, from
http://www.iasb.org/About+Us/International+Accounting+Standards+Board+-+About+Us.htm