Convergence Of Iasb And Fasb Frameworks

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Advanced Financial accounting coursework student id: 3989178 Question 1 The idea of convergence first came about through post war economic integration, which was aimed to increase cross-border capital flows. During the late 1950’s, accounting principles that were used across the world needed to be harmonized so that differences among them could be reduced. Later in the 1990’s the concept of harmonization was superseded by the theory of convergence; the idea of a single set of standards across all major capital markets. There are many different accounting standard boards across the world; however the FASB and IASB have over the past ten years begun a project of convergence. The sole purpose of this is to improve their respective conceptual frameworks for financial accounting across the globe. The Financial Accounting Standards board (FASB) is an organization that develops generally accepted accounting principles (GAAP) within the United States of America. It was first designated in 1973 after replacing the Accounting principles board (APB) and the Committee on accounting procedure (CAP) which was part of the American Institute of Certified Public Accountants (AICPA). The International Accounting Standards board (IASB) on the other hand is a London based accounting standard which was set up in 2001. It is responsible for developing International Financial Reporting Standards (IFRS) and was previously seen as the International Accounting Standards Committee (IASC). Whilst the IFRS seems to be more principle based, Generally Accepted Accounting Principles are rule based. The Norwalk agreement in 2002 led the way for the two accounting standards boards to “acknowledge their commitment to the development of high-quality, compatible accounting standard that could be used for both domestic and cross-border
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