Comparison of Accounting Standards of FASB and IASB - Research Paper Example

Sur Lecturer Memo Comparison of Accounting Standards of FASB and IASB Accounting is a pivotal part in anyorganization. It shows the financial position of an organization and ability of a firm to settle its debts as they become due. However, various international bodies have documented accounting standards that need to be followed in preparing books of accounts ranging from balance sheet, to trading profit and loss accounts, to trial balance, to cash flows among many others. This paper seeks to compare and contrast the accounting standards of the Financial Accounting Standards Board (FASB) and the International Advisory Standards Board (IASB). The paper will also give a final recommendation as to which accounting standard the organization should adopt when preparing its financial statements such as statement of financial position, statement of changes in equity, statement of profit and loss and other comprehensive income, and statement of cash flows. The International Accounting Standards Board (IASB) is an independent body in the private sector. It develops and approves International Accounting and Financial Reporting Standards. The International Accounting Standards Board (IASB) functions under the International Financial Reporting Foundation oversight. It was formed in 2001 in replacement of the International Accounting Standards Committee. International Accounting Standards Board (IASB), under the constitution of International Financial Reporting Foundation, has a full responsibility for all technical issues of the financial reporting standards such as: preparation and issuing the interpretations of exposure drafts and International Financial Reporting Standards, full discretion in pursuing and developing technical agenda dependent on requirements of consultation with the public and trustees, the issuing and approval of interpretations by the International Financial Reporting Standards Interpretations Committee (IASB 25). The International Accounting Standards Board (IASB) has its own set accounting standards for preparing financial statements. It issues overall requirements for preparing and presenting financial statements. These standards include how these financial statements should be structured, the content minimum requirements and the overriding accounting concepts including: accrual basis of accounting, going concern, and the noncurrent and current distinction. The International Accounting Standards Board (IASB) requires that a complete financial statements set, should contain a statement of financial position, statement of changes in equity, statement of profit and loss and other comprehensive income, and statement of cash flows (IASB 27). On the other hand, the Financial Accounting Standards Board (FASB) is a not for profit, private organization. Its main purpose is to develop and issue generally accepted accounting standards (GAAP) within the United States in the interest of the public. The Financial Accounting Standards Board (FASB) has been designated by the Securities and Exchange Commission (SEC) as the organization responsible for developing and setting standards of accounting for public companies in the United States. The Financial Accounting Standards Board (FASB) was created in 1973 in replacement of Committee on Accounting Procedure (CAP) and the American Institute of Certified Public Accountants’ (AICPA) Accounting Principles Board (APB) (IASCF and IASB 25). The primary mission of the Financial Accounting Standards Board (FASB) is to develop and improve financial reporting and accounting standards for the education and guidance of the public including users of financial information and auditors. In order to achieve this, the Financial Accounting Standards Board (FASB) looks forward to: improving usefulness of accounting and financial reporting through emphasizing on the major characteristics of reliability and relevance, and on the traits of consistency and comparability; promptly considering any significant areas, in financial reporting, in deficiency that may be improved by setting standards; keeping accounting standards current in order to reflect changes in methods of carrying out business and in the global economy; improving common understanding of the purpose and nature of information in financial reports; and promoting concurrently the international convergence of accounting standards with the improvement of financial reporting quality (IASCF And IASB 27). The Financial Accounting Standards Board (FASB) has also developed its own accounting standards followed by majorly companies in the United States in order to achieve the above mentioned financial objectives. The standards of accounting developed by the Financial Accounting Standards Board (FASB) also demands that a complete financial statements set, should contain a statement of financial position, statement of changes in equity, statement of profit and loss and other comprehensive income, and statement of cash flows. Summarily, the Financial Accounting Standards Board (FASB) has developed accounting standards that foster financial reporting by entities of non-government providing information that is useful for decision making for the users of financial reports and investors. The accounting standards developed by the Financial Accounting Standards Board (FASB) consider the views of all stakeholders objectively, and is dependent on oversight by the Financial Accounting Foundation’s Board of Trustees. The accounting standards also encourage wide participation in determining the financial position of a company by all investors and other users of financial reports (Nikolai, Bazley and Jones 27). In general, both the International Accounting Standards Board (IASB) and the Financial Accounting Standards Board (FASB) have developed accounting standards used by companies all over the world. Most of the accounting standards and principles set by the two bodies are similar even though their primary mission and objectives may be different. For example, both the International Accounting Standards Board (IASB) and the Financial Accounting Standards Board (FASB) observe the following accounting principles: Entity principle, money measurement, cost, going concern principle, dual aspect principle, conservation principle, accounting period, realization concept, consistency principle, matching concept, and materiality principle (IASCF and IASB 28). These are important accounting standards and principles that are universally recognized and followed by companies all over the world. However, companies choose to follow only standards and principles of accounting from one body. This is so for reasons of consistency. In summary, both the International Accounting Standards Board (IASB) and the Financial Accounting Standards Board (FASB) have developed common grounds in accounting principles and standards. The two bodies share common accounting standards with very minimal differences. I would therefore recommend that our organization use the accounting standards and principles set by the Financial Accounting Standards Board (FASB) because it was designated by the Securities and Exchange Commission (SEC) as the organization responsible for developing and setting standards of accounting for public companies in the United States (Kieso, Weygandt And Warfield 31). The Financial Accounting Standards Board (FASB) is also the body that develops and issues generally accepted accounting standards (GAAP) within the United States in the interest of the public. This is a solid reason to apply its accounting standards and principle due to its worldwide recognition. Works Cited IASB. International financial reporting standards (IFRSs) 2009: official pronouncements as issued at 1 January 2009. New York: Kluwer, 2009. Print. IASCF and IASB, A Guide through International Financial Reporting Standards (IFRSs) 2007. New York: Kluwer, 2007. Print. Kieso, Donald, Weygandt, Jerry and Warfield Terry. Intermediate Accounting: IFRS Edition, London: John Wiley & Sons, 2010. Print. Nikolai, Loren, Bazley, John and Jones, Jefferson. Intermediate Accounting. London: Cengage Learning, 2009. Print. Read More