Fasb and Iasb Convergence

Accounting Standards Boards Paper

ACC 541

Joel Brown

October 18, 2010

Historical Relationship between the FASB and IASB

On September 18, 2002, members of the U.S-based Financial Accounting Standards Board (FASB) and the U.K.’s based International Accounting Standards Board (IASB), met in Norwalk, Connecticut. Their main goal was to develop a harmonious set of accounting standards that could be used in both foreign and domestic markets. Although both boards realized the challenges, they both pledged to devise financial reporting standards acceptable to all nations. Under the title of Memorandum of Understanding, the top priority for both boards was to remove a variety differences between U. S. Generally Accepted Accounting Principles (GAAP) and International Financial Reporting Standards (IFRS). The boards agreed to undertake a series of short-term convergence projects, major joint projects and design a joint conceptual framework. This would solidify their commitment to developing “common, high quality standards” (Anonymous).

Short-Term Convergence Projects

To achieve compatibility, the FASB and IASB focused their attention on aligning U.S. GAAP with IFRS. Both boards amended standards involving fair value option, research and development assets acquired in a business combination, borrowing costs, and segment reporting. They are collaborating to eliminate differences in accounting for taxes, investment properties, and research and development (Anonymous). This joint effort will hopefully fuse the gap between IFRSs and U.S. GAAP.

Major Joint Projects

There are eleven areas the boards have consider priorities. As a result, they are working together to make improvements. Although the boards have not solidified a solution, they are still working together to develop common standards. Convergent topics that are close to completion are business combinations, consolidations, derecognition, and fair value measurement. Important topics that...