In 1973, the Financial Accounting Foundation (FAF), an independent, private sector organization, established the Financial Accounting Standards Board (FASB) to establish and improve standards of financial accounting and reporting for nongovernmental entities. FASB has been the designated organization in the private sector for establishing standards of financial accounting that governs the preparation of financial reports by nongovernmental entities. The standards officially recognized as authoritative by the Securities and Exchange Commission are important to the efficient functioning of the economy because decisions about the allocation of resources rely heavily on credible, concise, and understandable financial information. The seven, full-time members of the FASB are appointed by the FAF's Board of Trustees and may serve up to two five-year terms. A 60+ person staff supports the Board. (FASB, n.d) IASB
The International Accounting Standards Committee (IASC) is an independent private sector body, formed in 1971 to develop worldwide accounting standards. The requirement for IASB had arisen because many countries did not have a program of developing accounting standards and because of the need to harmonize differences among national standards. Improved decision-making would occur because it would no longer be necessary to interpret foreign financial statements on account of comparable financial statements. The aim to IASB is to formulate and publish accounting standards followed in the presentation of financial statements and to promote their worldwide acceptance and observance. The IASB currently consists of 15 individuals, scheduled to increase to 16 members in 2012. [Schroeder, Clark, and Cathey, (2011)]
The FASB and IASB acknowledged their commitment to the development of high quality, compatible accounting standards for use in both domestic and cross-border financial reporting. The boards announced the issuance of a memorandum of...
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