International Convergence

Nancy Ceballos

Intermediate Accounting

Research Paper

October 20, 2014

International Convergence

        In the accounting world there are many standards and regulations that need to be met. The top three organizations that guard those standards are the Securities and Exchange Commission (SEC), American Institute of Certified Public Accountants (AICPA), and the Financial Accounting Standards Board (FASB). Besides these previously mentioned, there are other government parties involved in the standard setting. What would the financial world be without any rules and regulations? I would say a total disaster.

For over 50 years the financial regulators have wanted to join forces to see an international convergence of accounting standards. This idea arose in response to the World War II economic mixing and the cross border capital flow. In late 2002 the Financial Accounting Standards Board (FASB) and the International Accounting Standards Board (IASB) joined together to improve the financial reporting and to promote the international convergence of accounting standards. You may ask, what does this mean? How would it affect us? This means that the FASB and the IASB have come together to help develop a unified set of high quality in the international accounting standards that companies worldwide would use. This would help minimize the differences and improve the quality between the U.S GAAP (U.S Generally Accepted Accounting Principles) and the IFRS (International Financial Reporting Standards). The FASB and the IASB have been working together to reach this ambitious goal. For that they have already gotten a step closer with the 2006 Memorandum of Understanding (MoU), this would help to include the cooperation and alliance of wider range of standards setters around the globe. This would provide healthy global capital markets.

In my opinion, I believe that it is a good idea and important for the FASB and the IASB to join forces because it would help solve issues internationally. A convergence of accounting standards would help stakeholders, lenders, auditors, and companies compare the market value. If things like statements are done similarly, investors around the globe would have a better understanding of the markers look like. It would also reduce the cost to both the users and the persons in charge of preparing financial statements.