International Financial Reporting Standards

International Financial Reporting Standards

IASB & FASB Work Together (Converge) To Develop IFRS

As a result of Global Financial Crisis 2008, G20 requested a single set of high quality international accounting standards. Considering the increasing need of single comparative applicable set of accounting principles, the International Accounting Standard Board (IASB) has been working closely with the Financial Accounting Standards Board (FASB) to converge many of the requirements of International Financial Reporting Standards (IFRS). Their highest priority concerning convergence of IFRS has been to address leasing, revenue recognition, and financial instruments. In addition, there are other key areas of IFRS that are under consideration as well. These efforts to develop IFRS are then be assessed by the Security and Exchange Commission (SEC) in order to incorporate IFRS into the U.S. public firms' financial reporting system (KPMG, 2010). Thus, FASB and IASB collaborate together in order to develop or converge IFRS for the benefits of global economy.

Facts & Differences between the Methods

Facts Related To Convergence

IASB and FASB's aim is to enhance the standards of financial accounting for the benefit of potential as well as present lenders, investors, creditors, donors, and various other users of financial disclosures. They are working together and pursuing this convergence in order to make accounting standards as similar as possible throughout the world (FASB, 2013). Thus, FASB and IASB are working together for globally converging accounting standards that would result in increased comparability which will be beneficial for investors, creditors, auditors, firms, and other participants in the financial reporting system.

The IASB and FASB have been working mutually to converge since 2002, while describing meaning of this convergence and their tactics to accomplish. Currently, Boards have completed many different converged accounting principles such as non-controlling interests or fair value measurement. The FASB has issued these standards as U.S. GAAP and the IASB has issues them as IFRS. Over the period, these sets of standards are expected to both enhance in quality and become increasingly identical (FASB, 2013). For instance, there is a major concern regarding lease as many transactions of lease are currently recognized off-balance sheet. Since it is a significant source of financing for several firms that lease assets, there is a greater need of focusing on the difference in methods. Thereby, IASB and FASB are focusing on lease to increase the transparency as well as comparability between firms that lease assets by recognizing liabilities and assets that occur due to lease transactions on the balance sheet of lessee (FASB, 2013).

Differences in Methods While Converging & Improvements to IFRS

The classification and measurement of financial instrument also considered while converging IFRS, but the two boards went different ways. According to IASB issued IFRS in November 2009 (for assets) and October 2010 (for liabilities), certain financial assets amortized cost and certain fair value via earnings and loss, and certain equity instruments at fair value via other comprehensive income. Most liabilities at amortized cost but with the option of fair value and other comprehensive income alternative ...