Understanding the relationship between the IASB and FASB
There have been significant changes made in the understanding of the relationship between the International Accounting Standards Board (IASB) and the Financial Accounting standards Board (FASB). At this time both the IASB and the FASB our cooperating in a project called the convergence project in hopes of making the International financial reporting standards and the U. S. GAAP more cohesive. The other aspect of this paper besides the brief history of the relationship between the IASB and the FASB will be the MSA program and how it aides in preparing students for a career in the accounting field. This paper will be to first explain my understanding of the IASB and the FASB boards and secondly, the MSA program and how these topics can affect the future of accounting professionals and the procedures that they must follow.
The history of the IASB begins in 2001 when it was formed to replace the International Accounting Standards Committee (IASC). The IASC at the time was responsible for establishing the International accounting standards (IAS). IASB itself is responsible for issuing the guidelines that would become the International Accounting Standards (IAS) and the International Financial Reporting Standards (IFRS) as well. The IASB was formed for the purpose of accomplishing to objectives. First to establish and publish accounting standards that could be used in presentations of financial statements promoting their acceptance and observance globally and second, to work towards the improvement, to work towards the improvement and synchronization of accounting standards, regulations and procedures relating to the preparation of financial statements. The IASB structure has the following main features: the IASC Foundation is an independent organization having two main bodies, the Trustees and the IASB, as well as a Standards Advisory Council and the International Financial Reporting Interpretations Committee. The IASC Foundation Trustees appoint the IASB members, exercise oversight and raise the funds needed, but the IASB has responsibility for setting International Financial Reporting Standards (international accounting standards).
The FASB was established in 1973 as a private not for profit organization that develops the Generally Accepted Accounting Principles (GAAP) as its primary purpose for the United States. The FASB is part of a structure that is independent of all other business and professional organizations. Before the current structure was created financial accounting and reporting standards were established first by the Committee on Accounting Procedure of the American Institute of Certified Public Accountants (1936–1959) and then by the Accounting Principles Board, also a part of the AICPA (1959–73) (). Pronouncements of those predecessor bodies remain in force unless amended or superseded by the FASB. The FASB is subject to oversight by the Financial Accounting Foundation (FAF), which selects the members of the FASB and the Governmental Accounting Standards Board and funds both organizations.
The FASB and the IASB also are in the process of establishing a convergence commitment. This is a commitment to establish at some point in the future identical accounting standards that would be accepted globally. At this point the FASB focuses on the U.S. and the ISAB concentrates on international matters. This commitment would when in place make things simpler for both the general public and the accounting profession because everyone involved would have access to the same information in the same format. The standards are a limited scope among those differences. Intentions of FASB are to amend applicable literature of GAAP to eliminate differences or converse to the IASB the Board’s underlying principle for voting not to change U.S. GAAP. On the contrary, the same goes for IASB to determine whether to amend literature of IFRS or converse with FASB for voting not to change its GAAP. The FASB and IASB have agreed to the best of their ability to issue drafts of recommended changes to IFRS or GAAP that propose a solution to the known differences. Both boards promised to maintain compatibility with future work programs and continue progressing on joint projects. The purpose of this project was to identify common high-standard solutions to attain compatibility (Cathey, Clark, & Schroeder, 2005).
The IASB standards work to improve procedures in the presentation of financial statements. IASB issued a series of accounting pronouncements called International Financial Reporting Standards (IFRS). The Framework for the Preparation and Presentation of Financial Statements was developed by IASB. In spite of this release, it is similar to FASB’s framework of Conceptual Framework Project. Specifically, “the objective of financial statements is to provide useful information to a wide range of users for decision-making purposes. The information provided should contain the qualitative characteristics of relevance, reliability, comparability, and understandability (Cathey, Clark, & Schroeder, 2005, p.25).” However, FASB’s framework was considered to be fairly different in being more precise than the framework of IASB.
FASB’s framework consists of two key components: (1) financial reporting objectives and (2) the ideas that effect and follow rationally from those objectives. An entity’s financial resources are focused on by the objectives, the claims to those resources, and the changes in them, it follows that the definitions of assets, liabilities, and other elements are key concepts in the framework (Cathey, Clark, & Schroeder, 2005).
“The IASB Framework for the Preparation and Presentation of Financial Statements serves as a guide in resolving accounting issues not addressed directly in a standard (IAS Plus, 2009).” It’s a requirement to establish and apply an accounting system for an entity and to use its judgment that results in information that is pertinent and reliable. IASB has a requirement for management to take into account the terms, recognition criterion notions for assets, liabilities, revenue, and everyday expenditures in the framework (IAS Plus, 2009).
Norwalk Agreement occurred in 2002, in which FASB and IASB made an agreement to function together to concentrate on individual differentiations between U.S. GAAP and IFRS, which include: combined projects to create new guidelines that could be relevant to both U.S. GAAP and IFRS and formal FASB supervision of projects directed by IASB. The FASB and the International Accounting Standards Committee (IASC) had far realized that for global capital markets to work appropriately, high-quality global accounting standards should have to exist (Rowen, 2007).
The Master of Science in Accounting (MSA) program is designed to meet the expectations of an education model known as the National Association of State Boards of Accountancy (NASBA). Every state has its own requirements that must qualify if planning to take the Certified Public Accountant (CPA) exam. The website of NASBA has links to each state’s board including information for a specific state. Several states have a requirement of a combination of total semester hours (frequently 150) of education with both undergraduate and graduate courses. Often states require between 24 to 30 hours of accounting-particular courses. Some states do not count the introductory accounting courses when determining total accounting hours, whereas others count introductory courses but require a higher number of total hours. The MSA program is designed to assist with most of these requirements. It is important to check your particular state agency to identify the requirements that need to be met before sitting for the CPA exam and to understand that some states may require between 21 to 30 hours in general business education too (University of Phoenix, n.d.).
Because the CPA exam is difficult, often some students may need to take an additional CPA exam preparation course after they have completed their required educational requirements. The MSA Program has included exam preparation software that will be used throughout the courses and can be used when finished with the degree and preparing for the CPA exam (University of Phoenix, n.d.).
The MSA program provides texts that offer current and historical viewpoints on the different features of accounting. Text knowledge is not enough to succeed. Accounting is complex; but changes continually. The MSA program is simply building the foundation for the learning that will continue throughout the student’s career. As top practices gradually develop, and regulations are changed, it is important for accounting students to develop the research skills necessary to do well in the profession. For that reason, assignments are designed based on recent practices and challenges best answered in the course of steadfast research (University of Phoenix, n.d.).
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