Accounting_Standards_Board_Paper

Systematic accounting practices are paramount in creating financial information that is useful to the users. For information to be useful it must assist in decision-making and possess the characteristics of relevance, reliability, comparability and consistency with underlying assumptions such as monetary unit, economic entity, time period, and going concern as well as cost principle (Kimmel, Weygandt & Kieso 2007.) Therefore, a variety of standard setting bodies have been developed to determine guidelines. Two of these bodies include the Financial Accounting Standards Board (FASB), which is the primary for the United States and the International Accounting Standards Board (IASB), which is the primary for countries outside the United States. The FASB started in 1973 and replaced the Accounting Principles Board (APB) and the Committee on Accounting Procedure (CAP). “The FASB‘s mission is to establish and improve standards of financial accounting and reporting for the guidance and education of the public, including issuers, auditors, and users of financial information” (Schroeder, Clark, & Cathey 2005, p. 7). The FASB issues four types of pronouncements, to define and educate Generally Accepted Accounting Principles (GAAP) users: 1. Statements of Financial Accounting Concepts, 2. Statements of Financial Accounting Standards, 3. Interpretations, and 4. Technical Bulletins (Schroeder, Clark, & Cathey 2005). These are then given a level of authority that is enforced by the SEC and thus a hierarchy is established that assist in selecting the principles to use in different accounting issues. The board that governs the FASB is the Financial Accounting Foundation (FAF). Fifteen trustees appoint the Financial Accounting Advisory Council (FASAC), which advises the FASB and appoints the seven members of The FASB, most of which are Certified Public Accountants (CPA’s) in public practice (Schroeder, Clark, & Cathey 2005). The IASB objectives are: 1. To formulate and publish in the public interest accounting standards to be observed in the presentation of financial statements and to promote their worldwide acceptance and observance: 2. To work generally for the improvement and harmonization of regulations, accounting standards and procedures relating to the presentation of financial statements (Schroeder, Clark, & Cathey 2005, p. 15). The IASB issues Statements of Accounting Standards and Statements of Financial Reporting Standards as well as Interpretations originated by the International Financial Reporting Interpretations Committee (IFRIC) or the former Standing Interpretations Committee (SIC). These are similar to the original pronouncements issued by the FASB; Statements of Financial Accounting Concepts and Technical Bulletins. The FASB is not a member of the IASB therefore its standards do not have authority in the United States (Schroeder, Clark, & Cathey 2005). The IASB started April 1, 2001 replacing the International Accounting Standards Committee (IASC); it consists of fourteen individuals appointed by the nineteen trustees of the IASC Foundation, with the key qualification for membership being technical expertise. To ensure that the board is diverse the following guidelines are in place: 1.A minimum of five with have a background as practicing auditors. 2.A minimum of three will have a background in the preparation of financial statements 3.A minimum of three will have a background as users of financial statements. 4.At least one member will have an academic background. 5.Seven of the full-time member will be expected to have formal liaison responsibilities with national standards setters in order to promote the convergence of national accounting standards and the IAS (Schroeder, Clark, & Cathey 2005). The IASB and the FASB both have frameworks to serve as guides and both agree on the qualitative characteristics of financial statements including relevance, reliability, and comparability. The IASB is not as strict as the FASB and currently lacks an enforcement entity such as the Securities and Exchange Commission (SEC). Critics claim that the FASB is excessively complex and requires many rules that can be manipulated to deceive financial users and that the IASB is excessively lenient thus giving organization more latitude to arrange financials to best suit company agendas and thus mislead users. The world economy is becoming more connected as businesses and investors expand to countries outside their own. Many differences exist within countries that influence financial accounting, including histories, values, cultures, and political, and economic systems (Schroeder, Clark, & Cathey 2005). These differences can make it very difficult and costly to interpret and participate in foreign markets. Therefore, there is a need to simplify and harmonize accounting standards to make them more comparable and usable. In October 2004, the ISAB and the FASB began a project to develop a common conceptual framework that brings together and improves upon the existing frameworks of IASB and FASB (Mirza, Orrell, & Holt 2008). Furthermore, the FASB is working on the International Convergence Project in an attempt to remove a variety of individual differences between United States GAAP and International Financial Reporting Standards that are not in the scope of other major projects (Schroeder, Clark, & Cathey 2005). Although there is still much work that needs to be done before there is an international accounting standard used by all countries, there has been progress made in this area. The Masters of Accountancy (MSA) program, through University of Phoenix, prepares the student for a life within the accounting profession by providing a well rounded curriculum and education in a broad range of areas. The program is designed to meet the requirements of the National Association of the State Boards of Accountancy (NASBA) as well as prepare the student to take the Certified Public Accountant (CPA) exam. The curriculum includes principles of accounting as well as more specific areas such as auditing, taxation, managerial aspects, legal aspects, and forensic accounting. The student not only learns how to interpret and apply the standards and principles but also a history of how the standards were created and implemented as well as history of the formations of the governing bodies. This gives the student a solid platform on which to build and prepares the student for a career in the accounting field. The field of accounting is constantly evolving to meet the needs of a changing world and economy. Throughout history, large scale occurrences have required an adaptation of the rules and regulations, such as Industrial Revolution, the Great Depression, the Enron and Anderson meltdowns, and most recently the expansion of world trade. By examining and mastering the theories and principles that make up the accounting profession the student is prepared to assist in managing and solving future issues in accounting professions. References Kimmel, P. D., Wegandt, J. J., & Kieso, D. E. (2007). Financial Accounting (4th ed.). Hoboken, NJ: John Wiley & Sons, Inc. Mirza, Ali Abbas, Orrell, Magnus, Holt, Graham J. (2008). IFRS Practical Implementation Guide and Workbook (2nd ed.). Hoboken, NJ: John Wiley & Sons, Inc. Schroder, Richard G., Clark, Myrtle W. & Cathey, Jack M. (2005). Financial Accounting Theory and Analysis (8th ed.). Hoboken, NJ: John Wiley & Sons, Inc.