What are the convergence projects between FASB and IASB? What are their major problems? What are their major achievements?
The Norwalk Agreement, first announced on September of 2002, was a paramount step towards a unified global accounting standard. In this document, both U.S. Financial Accounting Standards Board (FASB) and the International Accounting Standards Boards (IASB) (the Boards) “each acknowledge their commitments to the development of high quality, compatible accounting standards that could be used for both domestic and cross-border financial reporting.” (MoU Progress Report, 2008) In 2006, and subsequently updated in 2008, the boards agreed on a Memorandum of Understanding (MoU) which detailed the short and long-term convergence projects “that would bring the most significant improvements to International Financial Reporting Standards (IFRS) and U.S. Generally Accepted Accounting Principles (US GAAP).” (IASB-FASB, 2012). While many of the short-term and long-term convergence projects have been completed, currently, the boards have yet to finalize all of the technical pronouncements regarding Financial Instruments, Revenue recognition, and Leases. Herein, I will discuss the purpose of the convergence projects, their major problems they face and their major achievements to date. The purpose of the convergence of accounting standards is to have a single set of globally accepted accounting standards where understandability, relevancy, reliability, and comparability across multinational borders are faithfully represented, and credible. Convergence refers to the increase in the comparability of different entities’ financial reports, which will contribute to the free flow of global investment and benefit a variety of stakeholders (i.e., investors, corporates and auditors) (PWC, 2007). Additionally, to simplify and reduce the “administrative burden on multinational reporting entities” (FASB Attachment F, 2004), and “improve the ability of investors to...
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