In this study, I would discuss about the IASB as well as the FASB and their relationship with each other. I would then evaluate the SEC proposal and express my opinions about the same. IASB & FASB and Their Relationship with Each Other In year 1973, the International Accounting Standards Committee (IASC) was set up for the purpose of maintaining standardization in the accounting principles all over the world. In 2001, the International Accounting Standards Board (IASB) was constituted subsequent to the restructuring of the IASC. The main goal of the IASB was to prepare and issue standards to be observed in the development of financial statements and also to encourage the global recognition and adherence of those standards. The IASB had hitherto issued various standards known as the International Financial Reporting Standards (IFRS) on different accounting subjects (Deloitte, 2011). The Financial Accounting Standards Board (FASB) was formed in 1972, as a nominated institute in the private sector for setting up standards of financial accounting as well as reporting in the USA. The local firms in the United States that are listed with the Securities Exchange Commission (SEC) are required to file their financial reports exercising the Generally Accepted Accounting Principles of the United States (US GAAP) (Financial Accounting Standards Board, n.d.). The FASB and the IASB are fundamentally built under the same theoretical framework. Nevertheless, there are certain major dissimilarities between the standards issued by the IFRS and the US GAAP. The IASB standards are broader and have restricted interpretive assistance for their implementation, as compared to those of the US GAAP. The IASB does not usually issue interpretations of the IFRS, and rather lets the International Financial Reporting Interpretations Committee (IFRIC) and the individual auditors to put into practice the principles embodied in the IFRSs. While the US GAAP standards, as a result of the strong legal and regulatory surroundings in the US, have a more prescriptive policy. Consequently, the US standards enclose the underlying principles, complete implementation direction as well as the industry interpretations (Ernst & Young, 2010). Evaluation of the SEC Condorsement Proposal The Condorsement Proposal made by the Securities Exchange Commission (SEC) is a combination of the convergence approach and the endorsement approach for the amalgamation of the IFRS with the US GAAP. The condorsement framework summarized by the SEC consists of three phases of convergence and an ongoing process of endorsement where the FASB assesses the necessary and appropriate modifications in the IFRS for utilization by the US companies. The first phase of convergence consists of the completion of the projects under their Memorandum of Understanding (MoU) by 2011. In the subsequent two phases the FASB would devise arrangements to amalgamate dynamic IFRS schemes into the US GAAP and also merge all the other IFRSs into the US GAAP, in a period of 5-7 years (Lamoreaux, 2011). I think that the condorsement approach is significant because such an exclusive hybrid approach would probably lessen the tension on the financial reporting method. The condorsement strategy necessitates the classification of the current US GAAP standards into various
The SEC’s “Condorsement” Proposal Table of Contents Introduction 3 3 IASB & FASB and Their Relationship with Each Other 3 Evaluation of the SEC Condorsement Proposal 4 References 7 Introduction In the year 2002, the Financial Accounting Standards Board (FASB) and the International Accounting Standards Board (IASB) agreed to eliminate the various differences and unite their standards in the ‘Norwalk agreement’…
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The proposal has the following points for discussion:
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