The changing accounting industry: IASB and FASB convergence project
International accounting standards that are acceptable worldwide are becoming increasingly important as the economy becomes more global. Companies no longer operate in a single country and now require international standardized accounting practices and principles to enable users of the financial statements access to comparable information that is useful and understandable. Having worldwide accounting standards will save multinational companies time and money since they are currently forced to prepare multiple sets of financial statements, to cater to the requirements of different governing bodies and other interested parties. Worldwide accounting standards will allow better comparisons between companies from different countries and encourage investors to invest in companies they would not otherwise invest in.
The International Accounting Standards Committee (IASC) was created in 1973 to meet the need for the development of worldwide accounting standards. The IASC issued International Accounting Standards (IAS). In 2001 the IASC was replaced by the International Accounting Standards Board (IASB). The IASB issues International Financial Reporting Standards (IFRS) and has adopted all the IASC International Accounting Standards (IAS). The IASB has no authority to enforce standards and the standard setting bodies for the United States (the Financial Accounting Standards Board (FASB) and the Securities and Exchange Commission (SEC)) are not members of the IASB.
The FASB is the official body charged with issuing accounting standards in the United States and produces FASB statements and FASB Interpretations that constitute the US Generally Accepted Accounting Principles (GAAP). US GAAP is more complex than most international accounting standards. Investors and multinational companies find the process of reconciling their financial statements to US GAAP, difficult and time consuming.
In 1989 the IASC...