Comparison of FASB & IASB - Research Paper Example

FASB & IASB Accounting standards are being followed globally which serve to set benchmarks that have lasting impressions and footprints on the different companies and institutions which serve to look after the interests of the financial organizations, banks and intermediary companies – all of which are involved within the accounting regimes in one way or the other. The Financial Accounting Standards Board or FASB and the International Accounting Standards Board or IASB are accounting boards that are directly linked with the profession of accounting worldwide. There are a number of differences between the two which suggest for their diversity and distinctions. The FASB came into origin in the year 1973 and is based within the United States of America. It came into effect as it was a substitute for the Accounting Principles Board (APB) as well as the Committee on Accounting Procedure (CAP). The FASB is a non-profit institution which essentially takes care of the Generally Accepted Accounting Principles (GAAP) that is geared towards the interests of the public. The Financial Accounting Foundation (FAF) is the authority body that selects the board members within the FASB. It comprises of 5 full time members who need to give up their affiliations that they might have with their earlier organizations where they have worked in the past. These members are given 5 year tenures and after this period, receive a further 1 year extension. These five full time members are supplemented with 68 professionals who are selected from a number of different fields like the government, industry and public accounting. On the other hand, the IASB was formed in 2001 and is based in the United Kingdom. It serves as the successor of International Accounting Standards Committee (IASC). The IASB takes care of the development of International Financial Reporting Standards (IFRS) as well as does its bit at promoting these standards across the board. The IFRS Foundation is marked as the parent entity of IASB. The IASB is a trendsetter within the accounting standard. It is privately funded and independent in its own right. It has 16 board members, where each one of the board members has a separate vote. These members are selected on the criterion that they will be competent and have professional experience under their belt. There is an approval sought from nine members as unanimous votes are not counted for the publication of standards. The IFRS Foundation has the responsibility of raising funds for the IASB activities and operations. These include the different banks and financial institutions which have interests within the promotion of the international accounting standards. It was in the year 2008 when American companies contributed around £2.4m, which was a sum greater than offered by any other nation of the world. Due to the serious financial crunch which started in the year 2007, a shortfall came about in the year 2010. The motto of the FASB is to serve the investment public by revealing transparent information which comes about due to high quality financial reporting standards that are developed within an independent, private sector as well as under an open due process. An oversight by the Financial Accounting Foundation (FAF) upon the FASB, this body recruits the members of the FASB through their funding mechanisms which are in place (FASB Website). The Board of Trustees within the FAF get selected by a number of different organizations which shall take into perspective the American Accounting Association, the American Institute of Certified Public Accountants, the Securities Industry Association, the Institute of Management Accountants, the National Association of State Auditors, Comptrollers and Treasurers, the Financial Executives International, the CFA Institute and the Government Finance Officers Association. In 1984, FASB formed the Emerging Issues Task Force (EITF), which was a form instituted to make sure that the provision of timely responses towards financial issues as and when they emerged, were recognized. EITF comprises of 15 individuals who get selected amongst the public and private sectors as well as some representatives from the FASB. There is also one SEC observer among these 15. When the issues come about, the EITF takes them up, analyzes them and then attempts its course to reach a consensus which will detail the course of action that should be taken in the coming days. If a consensus is reached, they give out an EITF issue where the role of the FASB is not involved. It is important to know that an EITF issue is valid as much as a FASB announcement which gets its due share within the GAAP. The IASB structure comprises of the IFRS Foundation which is an independent institution that has 2 main bodies – the Trustees, and the IFRS Advisory Council and the IFRS Interpretations Committee (which was previously known as IFRIC). The IASB members are appointed by the IASC Foundation Trustees as these look after the oversight and thus raise the funds which are needed. However the IASB has the role of setting up the IFRS which are indeed the international accounting standards that are recognized everywhere (IASB Website). Both the FASB and the IASB work for the upheaval of the accounting standards around the world. Even though they are accounting standards that are working for the overall good of the accounting practice, they bring with them a number of positives as well. Their incorporation has helped shape up the companies of today and has changed the stance that these companies took in the yesteryears. The diversity which comes about with the roles of FASB and IASB are enough for one to get a fair idea as to how the two work hand in hand with the accounting standards and practices worldwide. All said and done, both the FASB and the IASB have a number of common agendas but what is most important to know is that how these two work differently from one another. An effort has been made on the part of the writer to ensure here that both FASB and IASB are clear from their respective positions and look after the rights and interests of the accounting realms which are present within the different companies and organizations of the world. Works Cited FASB Website, Found Online at: www.fasb.org IASB Website, Found Online at: www.iasb.org Read More