Accounting was created thousand years ago. Many companies use accounting system to record, maintain and report, and analyze business financial transactions. Because managers and investors make their business decisions based on Financial Statement, information obtained from Financial Statement must be concise and reliable. Budgets and performance reports provide decision support, planning and control business operations; therefore, Financial Statements must be accurately to represent a true and fair view of companies.
To evaluate results of information from Financial Statement, accounting report must be related to the accounting standard principles which, currently, several organizations have established to comply with. Among all, the Financial Accounting Standards Board (FASB) and the International Accounting Standards Board (IASB) are the most influential standard-setters in accounting report systems. This paper will provide a brief history of each organizations and their interrelationship, in which IASB is equivalent to the original pronouncement of FASB.Furthermore, this paper will explain the benefit of Master of Science in Accounting (MSA) program and how it guides students to future professional career in accounting vocation. History of FASB The FASB, which is used broadly in the United States, sets General Accept Accounting Principles (GAAP). It was established by the American Institute of Certified Public Accountants (AICPA) because of recommendations from the Wheat committee in 1973. FASB has responsibility to set accounting standards for public company.The members of the FASB are full-time employees from various organizations such as the American Accounting Association; the AICPA; the Association for Investment Management and Research; the Financial Executives Institute; the Government Finance Officers Association; the Institute of Management Accountants; the national Association of State Auditors, Comptrollers, and Treasurers; and the Security Industry Association.
(Cathey-Clark- Schroeder, p. 10). The Financial accounting Foundation (FAF) governs FASB.
According to Cathey-Clark- Schroeder, the structure of FASB is as below: The mission of FASB 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. ” FASB develops broad accounting concepts, creates standards for financial reporting, and provides guidance on the implementation of standards. History of IASB The IASB is a private sector that was established in 2001 that replaced the International Accounting Standards Committee (IASC).
The main purpose for the creation of the IASB was to harmonize international regulations and accounting standards. The IASB standards work to improve procedures in the presentation of financial statement. IASB issued a series of accounting pronouncements called International Financial Reporting Standards (IFRS).
The relationship between FASB and IASB The FASB and IASB are collaborated to develop global accounting standards. They both focus on the principles of creating financial reports. The standards financial reports include financial statements, balance sheets, cash flow statements, income statements, etc.
These statements must be constructed to represent the fairly of company financial status so that public users can use to evaluate when making any business decisions. Although there are some differences of detail, IASB’s content shows a strong affinity with the FASB’s. Both accounting standard boards have conceptual frameworks in place. The FASB, which created the first set of frameworks, consisted of seven concepts and published each individually. On the other hand, the IASB was a single document; however, the framework of the IASB resembled the FASB’s. Both frameworks are incomplete because of lacking a treatment of measurement.According to Geoffrey Whittington (2008), the standard setters could not achieve a solution to the inflation accounting problem that users and preparers of accounts could be accepted.
Whittington also argued that the frameworks of both the IASB and the FASB gave emphasis to the usefulness of decisions to investors when the focus was on general financial reports (Whittington, 2008). A recent report shows that the International Financial Reporting Standards (IFRS) has called to replace the Generally Accepted Accounting Principles (GAAP) in the United States by 2014.This change will have a big impact on the United States public companies through the way they represent financial reports (Hail, Leuz, & Wysocki, 2009). The controversy between the United States GAAP and the IFRS are the fair value and the market value (Hail, Leuz, & Wysocki, 2009). If things persist, the Securities and Exchange Commission (SEC) and the FASB may come against the IASB. The SEC stated briefly that there are to be improvements about how the IASB be funded and governed. The board was also criticized for being inadequate.
Dr.Yvonne Hinson stated that the two boards had a meeting in 2002 and came to an agreement known as the “Norwalk Agreement” that was also called a memorandum of understanding. The memorandum stated that the IASB and the FASB would work toward a common goal (Hinson, 2009). Through a convergence, the United States could adopt the IFRS; however, arguments pro and con this issue have arose. Many say the convergence would send the United States back to the disaster in the 60s with the metric system (Hinson, 2009). Convergence would never take place if this happened.There should be a specific date for this process to take place.
Although others state that this convergence would have a weak set of standards. The differences accounting principles between the United States and other countries must be taken into consideration. The legal system of the United States is more of a litigious environment (Hinson, 2009). The biggest concern is without a legal makeover before converging to the IFRS, there may be some legal actions from the increase in judgments, which may be required by the IFRS (Hinson, 2009).The Sarbanes-Oxley is still another conversion issue that pertains to the funding of the IASB and the FASB.
Sarbanes-Oxley requires the FASB to be funded by public companies and accountants. No contributions are accepted and thus prohibited. The IASB is, however, funded by contributions. Contributions could lead to pressure from special interest groups who would be more apt to give. Concerning about the stability and credibility of the IASB, the source of funding is certainly an issue that needs to be addressed.
The MSA programThe Master of Science in Accounting (MSA) program is designed to meet the expectations of a higher education model known as the National Association of State Board of Accountancy (NASBA). MSA program is a comprehensive degree that prepares individuals to work in the accounting field via advanced level coursework in accounting subject area such as: communication for accountants, information systems, financial accounting report, legal aspects of business, internal control systems, taxation, auditing, not-for profit and government accounting, forensic accounting, and ethics in accounting.MSA also empowers individuals to undertake accounting related jobs in the corporate world. Additionally, MSA is also very useful for providing the academic prerequisite required for the professional certification exams in the accounting industry such as the certified public accountant or CPA and certified management accountant or CMA examinations. These certifications are extremely necessary in accounting industry, preparing individual to make further progress in accounting career and to obtain higher level positions in accounting. MSA in accounting provides a strong platform to clear these competitive exams.MSA in accounting equips individuals with a right set of analytical skills and tools for achieving success in today’s complex and dynamic accounting industry. Conclusion The paper provides information about the FASB and IASB, and emphasizes the important of MSA program.
The FASB and IASB have cooperated to achieve convergence of accounting standards. Both boards represent the principles accounting to guide companies perform financial statements that can be the reliable source for public users. Currently, the FASB and IASB are continued to work on the convergence to ensure a constant accounting environment.
The MSA program provides a solid knowledge about accounting, helping teaches student in pursuing a professional career.ReferencesFinancial Accounting Standards Board (FASB). 2002a. Proposal: Principles-Based Approach to US Standard Setting. File Reference No. 1125-001.
Norwalk, CT: FASB. Retrieved from http://www. fasb. org/jsp/FASB/Page/SectionPage;cid=1176154526495 Hail, L. , Leuz, C. , and Wysocki, Peter D. , Global Accounting Convergence and the Potential Adoption of IFRS by the United States: An Analysis of Economic and Policy Factors (February 25, 2009).
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