FASB - IASB Convergence (Other (Not Listed) Sample)

FASB - IASB Convergence.
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FASB - IASB Convergence.
The notion behind convergence of financial accounting standards board (FASB) and international accounting standards board (IASB) is to bring about global standards into the accounting systems. FASB's primary goal is to develop the financial accounting standards in order to benefit those involved in the financial reporting systems. In FASB's operations, there is much emphasis on comparing standards with that of the IASB in order to bring a convergence of accounting standards that is in line with internationally acclaimed accounting standards. Convergence will improve the quality of accounting standards, and also the users and those who prepare accounting statements the users will feel the effects of cost reduction. A joint meeting between FASB and IASB in 2002 resulted to issuance of the Norwalk Agreement. The agreement foresaw the commitment towards developing accounting standards that could be applicable both domestically and internationally in financial reporting. (Epstein 2014)
Consequently, FASB and IASB have changed over the last six decades, both having similar goals of providing international accepted standards of preparing financial statements. Hence, the development of a unification of international financial accounting standard that companies world over would use to compare financial reports. As the world turns to a global village and companies are being established in different jurisdictions, there is a need to establish standards that govern these firms regardless of their location. The chairman of FASB noted that must both FASB and IASB to evolve and accept the standards of other financial accounting boards the world over. (Henderson et. al. 2013)
Upon the signing of the Norwalk agreement between FASB and IASB in 2002, the two boards came up with a couple of long-term and short-term convergence projects namely. These were: revenue recognition; financial instruments; leases; and insurance. These projects aim at harmonizing standards between the two boards. In the agreements, they stated that they would adopt standards that were preferable between both the international financial reporting standards (IFRS) and the United States general accepted accounting principles (GAAP). Furthermore, where both boards needed a change, they would consult each other. Consequently, the 2002 agreement has evolved immensely over the last decade. This system of convergence has been widely accepted as and endorsed towards the achievement of a standard global accounting system.
An overview of the four joint projects that FASB and IASB have collaborated towards could be given in summary as follows: Revenue recognition project aims at establishing certain principles of reporting useful information to the financial report users. The information about the given nature, timing and uncertainty of revenues in contract with the clients are important. Many companies do not recognize leases as an important source of finance in the balance sheet. Therefore, FASB and IASB lease project objective was not to enhance the recognition of assets and liabilities that arise from leases. On Financial instruments as a joint project, FASB and IASB proposed expected credit loss models should replace the incurred loss model. Insurance as another joint project between FASB and IASB foresaw the undertaking of insurance contract projects in development of common, high-quality guidance. It addresses recognition, measurement, presentation, and disc...