March 14, 2011
Delphine L. Agnor Wolsker
The Relationship Between FASB and IASB
The International Accounting Standards Board (IASB) was created after the Financial Accounting Standards Board (FASB) to establish a single set of accounting procedures and standards for both boards. The process has not always been an easy one, but the goal of merging the accounting standards globally overrides the disagreements. Overcoming impediments, such as language, culture, economic and political environments has made the process problematical. The IASB and FASB continue to labor on the short term goals agreed upon at the Norwalk Summit, held in Norwalk, Connecticut, on September 18, 2002 [ (Business Wire, 2002) ].
In 1973, FASB was born of the Financial Accounting Foundation (FAF) to generate and rectify practices of financial accounting and reporting for nongovernmental businesses. This change was made because of the censure of the Accounting Principles Board (APB) The APB fashioned two committees, the Wheat committee, charged with examining the way financial accounting principles would be created, and the Trueblood committee, to verify the objective of the financial statements. The American Institute of Certified Public Accountants (AICPA), which took the place of the APB, put into operation the Wheat Committee recommendations and deems the FASB the official body to have authorization to originate standards for financial accounting [ (Schroeder, 2011) ]. With the growing number of multinational corporations, principles were required to surmount the obstacles and price related with generating numerous financial reports. In 1973, the International Accounting Standards Committee (IASC) was the first international group created to establish accounting standards. The IASC was restructured in 2001, and at that time became autonomous, renaming itself the International Accounting Standards Board (IASB) [ (International Accounting Standards Board, n.d.) ]. The international standards have developed rapidly with the modification [ (Financial Accounting Standards Board, n.d) ]. The original IASC board members represented nine countries: Australia, Canada, France, Japan, Mexico, the Netherlands, the United Kingdom, the United States, and West Germany [ (Schroeder, 2011) ]. As of 1983, IASC members included all trained accounting individuals who were members of the International Federation of Accountants. The ISAC was replaced in 2001 by the International Accounting Standards Board (IASB). They kept all of the ISAC’s pronouncements and positions unless they were superseded by new ones.
The relationship between the International IASB and the FASB has been described as fluid, always changing. Many issues must be deliberated before any major changes can be made on an international degree. An example of the features that must be contemplated in order to execute new accounting methods and practices are language, cultures, values, political and economic systems. The Convergence Project is an objective of the two groups, intended to abolish the dissimilarities between the United States’ General Accepted Accounting Practices (GAAP) and International Financial Reporting Standards [ (Schroeder, 2011) ]. The IASB and the FASB have an affiliation that could be defined as a partnership, as the IASB was fashioned to imitate the FASB. Both work to attain a single collection of accounting standards and financial reporting that can be used worldwide. When the European Commission desired all publicly listed companies within the European Union (EU) to merge their financial statements, the necessity for high quality accounting standards deepened [ (Gornik-Tomaszewski, 2003) ]. With the financial reporting crisis involving Enron, Tyco, Arthur Andersen, and others, the United States recognized their principles required upgrading....