Question

(1) Discuss the differences in approaches taken by the International Accounting Standards Committee (IASC) and the Financial Accounting Standards Board (FASB) in setting accounting standards.

(2) Research the advantages and disadvantages of the United States adopting international accounting standards in place of generally accepted accounting principles. Post your recommendation and support for your decision.

provide the answer with references:

Answer 1

IASC stands for International Accounting Standards Committee. This IASC is mainly concerned with developing International Financial Reporting Standards. It looks after these standards being properly promoted. This is purely privately owned and independently funded. This is done for profit purpose. They are responsible for looking after that standards are followed properly while making financial reporting. This is based in UK (London)

While if we talk about FASB which stands for Financial Accounting Standards Board, it works for no profit and is US based. It is mainly concerned with GAAP (Generally Accepted Accounting Principles).

The IASB works with IFRS foundation. All technical matters of this IFRS foundation is handled by IASB. This includes approving and issuing various interpretation which are developed by IFRS Interpretation Committee which is responsible for answering the questions regarding the application of the standards. Whatever is requested by IASB is worked out by IFRS.

IASB conducts meetings in open and also forecast it through web. It takes decisions on amendments on existing principles and what new standards should be set or interpretation to br made. All the groups involved collectively participate in the discussion.

The decisions are taken in a way as such: first members talk on what are the possible problems coming forward to which amendments are to be made. After this a proposal is being given, to how to tackle this problem. An analysis is done to find the best way to go through this. Here an exposure draft is being prepared on which discussions and meetings are held and it is also sent for public consultation. Now this consultation brings various feedbacks which is focused and then accordingly decisions are to be taken. Accordingly new amendments are maid and new standards are set. Now after setting standards, they are being implemented. But the process does not end here. After implementing there is a post implementation review, which provide them with the effect of new standards and amendments. This will tell whether this was fruitful or not.

While taking about FASB, it makes changes in standards, make new amendments for Financial Accounting Standards. It does not do for its own profit. The standards set by them may be followed by businesses or not, it's not compulsory. FASB takes feedback from those who prepare the financial reports so to make amendments. The process for this is as follows:

It identifies the topic or problem to be discussed. Then analysis is done on the topic and a research is conducted on the topic to better understand the problem. Then a decision is being made on the agenda. Then the decision is being discussed publicly and paper or documents are made for public to post their own comments and views.

The decisions of public are discussed by conference or meetings. Their views are also brought into consideration. After consultation from all members and public, problem comes to a decision. A final decision or amendment is decided and is ready to be implemented.

Here we saw the differences in both.