The Relationship Between Iasb and Fasb

The relationship between the IASB and FASB

The Financial Accounting Standards Board (FASB), organized in 1973, is an independent body created by the Financial Accounting Foundation (FAF), a non-stock corporation. FASB is the designated body in the private sector responsible for establishing standards of financial accounting and reporting in the United States. Those standards govern the preparation of financial reports and are provided for the guidance and education of the public, including issuers, auditors and users of financial information. On the other hand, the International Accounting Standards Board often abbreviated IASB, is a privately funded and an independent body based in London, England. It is responsible for developing International Financial Reporting Standards and making a follow up on the use of these standards (Alexander and Archer, 2008).

The FASB and the IASB held a joint meeting in Norwalk, Connecticut, on November 18, 2002. Both standards-setting bodies acknowledged their commitment to the development of high-quality compatible accounting standards that can be used for both domestic and cross-border financial reporting. They also promised to use their best efforts to make their existing financial reporting standards compatible as soon as practicable and to coordinate their future work programs to maintain compatibility (Schroeder, Clark, Cathey, 2005).

To this end, both Boards agreed to:

1. Undertake a short-term project aimed at removing a variety of differences between U.S. GAAP and IFRSs.

2. Remove any other differences between IFRSs and U.S. GAAP that remained on January 1, 2005, by undertaking projects that both Boards would address concurrently.

3. Continue the progress on the joint projects currently underway.

4. Encourage their respective interpretative bodies to coordinate their activities.

The 2002 Norwalk Agreement describes the FASB and IASB plans for achieving the goal, such as coordinating the agendas of...