Merger of the FASB and IASB
Dr. Steven Hall
Accounting 5312
29 June 2014
The Merger of the Financial Accounting Standards Board and the International Accounting Standards Board
The proliferation and evolution of international trading and commerce have not only opened the gateway to international markets for many of the world’s emerging economies, but they have also fostered an unprecedented growth in the number of multinational corporations. Spurred by trade agreements such as the North American Free Trade Agreement (NAFTA) and the World Trade Organization (WTO), the rapid expansion of global commerce has revealed many inherent obstacles and risks within the international financial structure. Disparate political, ethical, economic, and legal policies have impacted recording standards and are responsible for many inconsistencies in international financial reporting. Domestic accounting standards, collectively referred to as U.S. GAAP, or Generally Accepted Accounting Principles, are set and maintained by the Financial Accounting Standards Board (FASB), while international standards, known as International Financial Reporting Standards (IFRS), are issued by the International Accounting Standards Board (IASB). Citing the detrimental effects of accounting fraud by several large publicly owned firms, the subsequent passage of the Sarbanes-Oxley Act of 2002, and pressure from foreign governments and investors, the IASB and FASB begun work on a collaborative framework intended to merge U.S. GAAP standards with IFRS. The convergence of the two systems will eliminate nuances, rectify internal contradictions, and create a uniform set of standards to be used both domestically and internationally. However, despite its many apparent benefits, the plan has been met with skepticism and objections from some accounting professionals.
The Memorandum of Understanding, formally known as the Norwalk Agreement, was signed in 2002 and signaled the beginning of collaborative efforts between the IASB and the
Accounting 5312
29 June 2014
The Merger of the Financial Accounting Standards Board and the International Accounting Standards Board
The proliferation and evolution of international trading and commerce have not only opened the gateway to international markets for many of the world’s emerging economies, but they have also fostered an unprecedented growth in the number of multinational corporations. Spurred by trade agreements such as the North American Free Trade Agreement (NAFTA) and the World Trade Organization (WTO), the rapid expansion of global commerce has revealed many inherent obstacles and risks within the international financial structure. Disparate political, ethical, economic, and legal policies have impacted recording standards and are responsible for many inconsistencies in international financial reporting. Domestic accounting standards, collectively referred to as U.S. GAAP, or Generally Accepted Accounting Principles, are set and maintained by the Financial Accounting Standards Board (FASB), while international standards, known as International Financial Reporting Standards (IFRS), are issued by the International Accounting Standards Board (IASB). Citing the detrimental effects of accounting fraud by several large publicly owned firms, the subsequent passage of the Sarbanes-Oxley Act of 2002, and pressure from foreign governments and investors, the IASB and FASB begun work on a collaborative framework intended to merge U.S. GAAP standards with IFRS. The convergence of the two systems will eliminate nuances, rectify internal contradictions, and create a uniform set of standards to be used both domestically and internationally. However, despite its many apparent benefits, the plan has been met with skepticism and objections from some accounting professionals.
The Memorandum of Understanding, formally known as the Norwalk Agreement, was signed in 2002 and signaled the beginning of collaborative efforts between the IASB and the
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