Fasb and Iasb Convergence

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FASB and IASB Convergence Introduction FASB (Financial Accounting Standards Board) is an independent board consisting of accounting professional who develop and communicate Standards of financial accounting and reporting in United States. IASB (Independent Accounting Standards Body) is an organization responsible for the development and publication of IFRS (International Financial Reporting Standards) as developed by the IFRS interpretation committee. Goodwill Goodwill is an accounting term, which refers to the value of an asset that is invisible but has a quantifiable “prudent value” in the business. Financial Accounting Standards Board uses a two-step process to determine if the goodwill is impaired. The first being Recoverability Test, this step indicate the goodwill is impairment. The second step is completed to measure the loss. Independent Accounting Standards Body uses only the second process to measure the loss (Wearing, 2008). IASB prefers to use the one-step approach because they feel that, to implement the second step is costly and complex. On the allocation of goodwill, Financial Accounting Standards Board does this based on the reporting unit level while Independent Accounting standard body uses cash generating unit (Williams, 2003). Independent Accounting Standards Body addresses recovery of impairment losses but according to Financial Accounting Standards Board, impairment loss of goodwill in a previous period cannot be reversed. The two bodies test for goodwill impairment annually. Convergence of the two bodies will lead to creation of new improved standards for the two bodies. Based on the determination of the goodwill, there should be a test for impairment. This will lead to additional cost for IASB. References Stittle, J., & Wearing, B. (2008). Financial accounting. Los Angeles: SAGE Publications.

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