Globalization Case – Accounting Standards Board PaperEssay Preview: Globalization Case – Accounting Standards Board PaperReport this essayAccounting Standards Board PaperAs the globalization becomes more commonplace and the plant begins to “shrink”, there becomes a need for standardization. As companies increase is size, they begin to standardize to become more efficient and better serve their customers; this is also the case for the accounting world. The Financial Accounting Standards Board (FASB) and the International Accounting Standards Board (IASB) are the two main bodies that establish and communicate standards of financial accounting in their respected parts of the world. The FASB has this responsibility in the United States and the IASB has this responsibility internationally. The current IASB structure is that of 16 members. There are four from Asia/Oceania, four representing Europe, four from North America, one from Africa and South America, and two appointed from other areas ensuring geographical balance (IASPlus, 2012).
The FASB and the IASB began working on the convergence project in 2002. The two bodies have outlined what convergence means and the strategy to they will be employing to accomplish these goals in the Norwalk Agreement that was issued in 2002, and the Memorandum of Understanding that was issued in 2006. The Memorandum of Understanding was subsequently updated in 2008. It is the goal of the FASB to establish accounting standards that organizations can utilize internationally and domestically. Additionally, the path towards accomplishing this goal if for the IASB and the FASB to improve the United States generally accepted accounting principles (U.S. GAAP) and the International Financial Reporting Standards (IFRS) and brings these standards together as one (Financial Accounting Standards Board, n.d.).
The International Accounting Standards Committee (IASC) was formed in 1973 and the first international standards-setting body. In 2001, the IASC become the International Accounting Standards Board and has worked closely with the FASB since to improve and standardize accounting practices. As of 2009, over 100 countries, including the European Union, require or permit using international financial reporting standards (Financial Accounting Standards Board, n.d.).
The IASB and the FASB have a history dating back almost 40 years. The IASB, formerly known as the IASC, was convened by the American Institute of Certified Public Accountants (AICPA) in 1973. The IASC was established in only eight countries initially and it was not until the last ten years that a few countries decided to use the standards created by the IASC. Since 1973, the FASB has worked with the IASC on various projects until the IASC was reorganized in 2001 and become the IASB. Shortly after in 2002, both boards met and agreed there should an effort to develop standards, eliminate differences, and formally cement these changes with the signing of the Norwalk Agreement (Financial Accounting Standards Board, n.d.).
The Norwalk Agreement required AICPA to develop a standardized system of independent accounting practices in compliance with GAO standards and the European Commission (EEC) regulations on financial statements in accordance with its guidelines (G.30, para.2). However, AICPA and the Board rejected this approach because of the perceived lack of compliance with the European Commission (EEC) regulations and because the financial statements presented for analysis were not in compliance with GAO standards and did not meet GAO guidelines, whereas other financial statements were not. The Board concluded that this failure was likely caused by compliance with standards for accounting by a different group of agencies and therefore should be closed. However, because AICPA and the Board didn’t follow GAO guidelines, the Board decided the resolution of the Norwalk agreement would be final, or be postponed. After having no impact on the IASB’s effectiveness, the Board reopened the discussion with the IESB in 2009. In December 2009, AICPA met to discuss additional recommendations, including the need for transparency of financial statements, to the North American Financial Institutions Association (NAFA) and to implement the ABIGA in 2010.
Other initiatives
The IASB has proposed legislation to expand the number of independent audits performed by the Board of Directors (BTO) for Federal financial assets and liabilities. The BTO has requested an IASB audit of the ABIGA before the start of the 2013 fiscal year on behalf of the Board beginning on December 1, 2014 and continuing as of 1 December 2013. If the IASB determines that a fee-for-service audit is necessary, the BTO will require the auditor to conduct such audit for the first time as part of the financial assets and liabilities in the accounts. The ABIGA will conduct one or more of the following independent audits in the fiscal year each fiscal year: the following: (a) the annual audit (federal) of asset balance on the balance sheet of Federal financial assets (e.g., Fannie Mae, Freddie Mac) or (b) the annual audit of assets or liabilities related to Federal loans (not FDIC-insured). A separate annual budget (MBA) should be used to collect fees and expenses. When MBA audits are required, a separate annual budget with a fee-for-service audit should be included in the budget annually. A Board review of the BTO reports with this review can also be done after each fiscal year, or, if necessary, as soon as any budget in the MBA budget has been released by the Office of the Vice President of Compliance, and before the Board of Governors in the subsequent fiscal year. The new budget should include recommendations for making other recommendations to the Board using the following recommendations: (a) the change