Globalization Case - Accounting Standards Board Paper

Accounting Standards Board Paper

As 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.).