Accounting Standards Boards Essay

Increased globalization in the business innovation has brought to fore some of the issues and challenges that multinational businesses face in financial recording and bailiwick of foreign based operations. With operations based in different countries that operate under different bill system principles and with varying currencies, there has been a need for the accountancy principles and standards to be converged.This has in the past nine years seen the accounting policy making suggesting a complete overhaul in the way financial statements ar reported and a convergence among the USs generally accepted accounting principles (US generally accepted accounting principles) and the International Financial Reporting Standards (IFRS). This has been through various meetings amid the International Accounting Standards Board (IASB) and US Financial Accounting Standards Board (FASB), two boards which determine these accounting standards. This paper therefore evaluates the history of the two boards and their alliance and looks at IASB equivalents to FASB original pronouncements. It also describes how a Master of Science in Accounting would prepare a student for an accounting profession. History of the Relationship between FASB and IASBUS Financial Accounting Standards Board (FASB) is a board which is responsible for setting and improving financial accounting standards in the US and for governing and boost preparation of financial reports by non-governmental organizations (Financial Accounting Standards Board, 2012).International Accounting Standards Board (IASB) on the other hand is also an independent board responsible for setting world-wide financial reportage standards (IFRS Foundation, 2011). Whereas IASB and IFRS takes a principle based rise to accounting standards setting, FASBS GAAP does this through pronouncements which are based or rules.They both locate a lot of emphasis on income statements, balance sheet, statements of changes in equity and cash flo w statements as key reports that are significant in financial reporting. oer the past decade these two boards which determine the accounting standards in the world have been functional towards ensuring that the financial reporting all over the world converges. The convergence concept first took root in the 1950s in response to the cross border capital inflows that were as a result of the scotch integration after world war two. These efforts initially focused on reducing difference in accounting principles between major capital markets globally otherwise referred to as harmonization of the accounting principles. By 1990s the concept had changed into convergence which sought to build high quality financial reporting standards to be utilize internationally (Financial Accounting Standards Board, 2012a).Both developed in the 1970s, FASB and IASC (international Accounting Standards Committee) a predecessor to IASB, set a trend for expanding international accounting standards and with the shake-up of IASC into IASB in 2001, the use of IFRS among various countries has progressed rapidly. For instance, over 100 countries and the European Union use these standards issued by IASB. The U.S. mainly uses its own issued US GAAP (Progress Report, 2011 Cain, 2008). IASB and FASB have been working together towards converging the IFRS and the US GAAP since 2002.Even China and Japan have been working to bring together their accounting standards with IFRS as at 2009. Over the past decade the pace of convergence has been very fast with the internationalization of standards growing rapidly. In 2010, Securities and Exchange Commission in the US issues a report supporting the convergence of these standards through incorporation of the IFRS in the US financial system (Financial Accounting Standards Board, 2012a). This implies that the US has been increasing exploring adopting IASBs IFRSs, although there have been issues such(prenominal) as the fair value issues in IFRS and the cos t of implementation that have slowed the progress. The IASB equivalents of the FASB original pronouncementsAs noted above, IASBs IFRS takes a principle based approach to accounting standard setting as compared to FASBs pronouncements which are viewed to be much stricter. In essence therefore, though IASB and FASB may address similar accounting concepts their approach to it may be different. It is these IASBs equivalents to FASBs pronouncements that bring the differences between GAAP and IFRS standards. Evaluating the FASBs original pronouncements and IASB, the manner in which accounting concepts are approached rout out be noted.These are whereas IASBs IFRS requires that blood line costs of sppetroleumage and idle capacity be excluded from the cost of inventory, FASBs GAAP does not IFRS requires yearly equivalence of financial statements unalike US GAAP which only views comparisons asdesirable but require three year comparisons IFRS permits but does not require reporting of compre hensive income distant US GAAP which requires it IFRS classifies liabilities as non-current if refinancing is complete earlier the date of the balance sheet contrasted GAAP which classifies it as so, if refinancing is completed before the financial statements are issued and prohibition of extraordinary items from the financial reports by IFRS unlike GAAP which permits but to a restricted items which affect kale and firing (Deloitte, 2004 FASB Report, 2002). opposite accounting concepts that differ between IASB and FASBs original pronouncements are that IFRS requires that LIFO method of determining inventory cost be prohibited in IAS 2, unlike US GAAP which permits LIFO in SFAS 151, and that IFRS requires reversal of inventory write downs if given criteria are met unlike US GAAP which prohibits it. In addition FASB permits that inventory at net value be measured even if it is above cost unlike IFRS which restricts this to producers and broker-dealers inventories. FASB classifies the interest received and paid as operating act in the cash flow statement unlike IASB which may classify it as financing, investing or operating activity.This leaves room for a number of interpretations. Furthermore, though FASB excludes overdrafts from cash, IASB includes it if it forms a critical and integral part of an organizations cash base or cash management (Deloitte, 2004 FASB Report, 2002). Other IASB equivalents to FASB pronouncements are enumerated as shown under (Deloitte, 2004 FASB Report, 2002) -IFRS restates previous financial statements in the event of non-mandated changes in accounting policy, unlike FASB which includes cumulative effects current financial statements net loss and profits -IASB uses change in estimated method to evaluate changes in depreciation of assets, unlike FASB which used change in accounting policy that is the net profit or loss cumulative effect. -IASB uses cost recovery method for construction contracts when the completed percentage cann ot be determined for sure unlike the USA GAAP which uses completed contract method -IASB does not recognize deferred tax due to the an asset or liability transaction that doesnt affect accounting or taxable profit and is not a business combination in IAS 12 unlike the US GAAP recognizes this these through its lack of initial credit rating exemption as addressed in SFAS 109.-US GAAP has special exemptions due to the provision of deferred tax such as leveraged leasing, intangible developments in the gas and oil industry and undistributed earnings -IASB uses a tax rate that is substantially enacted to measure deferred tax liabilities and assets, which can be left to a lot of interpretations, unlike FASBs enacted tax rate which is sure and consistent -IASB uses rate applicable to undistributed earnings of an organization to measure the deferred tax on those earnings , unlike FASB which uses the higher of the tax rate between the cardinal applicable to undistributed profits and the one applicable to distributed profits as addressed in SFAS 109-IASB recognizes put down for share-based payment based on fair value of the payment whereas FASB recognizes this based on intrinsic value at grant date -IASB measures business combinations on the date of the acquisition whereas FASB does this on the date of consummation or closing date -IASB requires that recognizing a liability prior to acquisition restructuring be only if the one being acquired recognizes it under IAS 37, this is unlike FASB which recognizes it if the acquisition has already began -IASB recognizes in process R&D as an intangible finite asset or in force(p) will, unlike FASB which recognizes it as expense How MSA Program prepares student for professional Accounting A Master of Science in accounting program is very important for anyone who intends to pursue an accounting race in the future.This program prepares a student by providing knowledge on the various accounting principles that need be applied in accounting profession. It also puzzles a student be aware of the various accounting standards that are existing in the world, how each differ, and how accounting records and through in each. In addition such a program provides analytical and critical thinking abilities. In addition, it offers a global perspective on accounting practices and business issues and provides a framework for effective development for team building and leadership skills, and ethical decision making in business. Lastly it will put up interpersonal and communications skills through interactions which seek to learn ways of solving problems and issues in the accounting and finance realm. All these are critical for a career as an accountant. ConclusionThis paper has discussed the history of the FASB and IASB boards and their relationship and has looked at IASB equivalents to FASB original pronouncements. It has shown that standardized management accounting and controlling concepts that transcend national bound aries are increasingly needed with concern on the need of an internationalized Accounting and financial reporting standard to help in comparing of financial statements of countries from different countries and also to make it efficient and less costly for multinational companies when they are conducting financial reporting of their performance. IASB and FASB have made tremendous progress thus fur in their call down to converge the global accounting standards.