FASB Recognition Differences

In May 2008, the AICPA’s Governing Council designated the International Accounting Standards Board (IASB) as the body authorized to establish international financial accounting and reporting principles under rule 202 and 203 of the AICPA Code of Professional Conduct. Below is an illustrative Independent Auditor’s Report on financial statements issued in conformity with IFRS.

As stated earlier, the IASB arose from specific needs of the accounting industry and the public. As international trade has increased, the need for transnational accounting information has increased as well. This sparked the demand for development of international accounting standards to make financial data between countries more comparable. In 1973, the International Accounting Standards Committee (IASC) was formed to develop these international standards. The standards issued by the IASC, prior to 2001, were called International Accounting Standards (IASs). In 2001, the IASC made the International Accounting Standards Board (IASB) the official international standard-setting body. The standards issued by the IASB are called International Financial Reporting Standards (IFRSs) (Schroeder, Clark, & Cathey, 2011, p. 82-87).

This research project will inform the reader of the difference between the United States accounting standards and International accounting standards. The United States uses the Financial Accounting Standards Board (FASB) to issue financial reporting procedures. The International Financial Reporting Standards (IFRS) are issued by the International Accounting Standards Board (IASB). There are proposals for the United States to adopt the International standards. Financial reporting procedures are debated about the United States using the Generally Accepted Accounting Procedures (GAAP) or following the global procedures. This

A joint convergence committee created the members of (FASB) and (IASB). (IASB) is recognized as an independent accounting standard-setting body that is similar to (FASB) that joins (GAAP), and is governed by the (IFRS) foundation. Due to this convergence, (AICPA) believes U.S. adoption of a single set of high-quality, globally accepted accounting standards will benefit U.S. financial markets and public companies by enabling preparation of transparent and comparable financial reports throughout the world, (American Institute of CPAs, 2016). Secondly, (AICPA) is dedicated to supplying the whole accounting profession with information, tools and IFRS.com for instance to assimilate as well as implement a new set of standards. As the (AICPA) supports continual convergence of reliable accounting standards between (IFRS) and (GAAP) the mission of completion between (IASB) and (FASB) is prolonged. (AICPA) will always support funding mechanisms of the body-making

Topic 842 will require the estimation of lease terms and subsequent lease payments by companies under a criteria that cautiously take into consideration, in addition to written lease arrangements, the “economic incentives for a company to exercise an option to extend a lease term or for an entity not to exercise an option to terminate a lease”. With respect to finance leases only, the lease payments will subsequently be discounted using the company’s incremental borrowing rate to reach the lease obligation. This lease obligation will then be disclosed as a liability with an offsetting disclosure of the right to use asset as an intangible asset on the balance sheet. The amount of the right-to-use asset will also include any direct cost related to the negotiation of the lease and payment by the company. With respect to capital leases, the lessee is required to separate the interest on the lease liability and the amortized right-to-use assets on the statement of comprehensive income. The payment of interest on the lease liability and lease payments are recorded in the operating activities of the statement of cash flows. The principal portion of the lease payment will be recorded within the financing activities section of the statement of cash flows.

Leases are classified into two main types; finance lease and operating lease. The impact of each type of lease on the company’s annual report is different. When accounting for finance leases, for example, the concerned lessee makes recognition of the asset that has been leased in the statement of financial position or balance sheet and consequently charges all other finance charges including the depreciation charges relating to the leased asset on to the statement of income or profit and loss

According to Hans Hoogervorst, Chairman of the IASB, there was a significant need for an improved leasing standard. (2)(16) The limitations of AASB 117 were as follows. Companies were unable to accurately assess the risk of potential future leasing transactions as a majority of leases were not reported on a lessee’s balance sheet (1). In order to address this issue, the new standard proposes changes to how lessors would account for leases that are not on the balance sheet (1). Under AASB 117, investors are making rough inaccurate estimates as to the hidden leverage from leasing. (2) With nearly all leases now appearing on the balance sheet with the new standard, the quality, accuracy and transparency of financial reporting will improve significantly (2) (1)

The International Accounting Standards Board (IASB) and the Financial Accounting Standards Board (FASB) are working together to eliminate a variety of difference between the United States generally accepted accounting procedures (U.S. GAAP or GAAP) and International Financial Reporting Standards (IFRS). This convergence project grew out of an agreement reached by the two boards in 2002 (Deloitte, 2004).

On the other hand, the International Financial Reporting Standards are the principles-based standards and explanations that have been implied by the International Accounting Standards Board or the IASB as a guideline for global financial reporting. The

The proposed changes through the IASB will answers worries that several lease obligations are not documented on the balance sheet and that the present accounting for leases fails to illustrate the economics of all lease transactions ( Significant Changes). The jist of the proposal is to require and organization to recognize assets and liabilities coming from a lease. This shows an improvement as the existing lease standards do not require lease assets and lease liabilities to be recognized by many lessees. A lessee would admit assets and liabilities for leases with a top term of more than twelve months (Significant Changes). The acceptance, appraisal, and delivery of expenses an cash flow coming from a lease by a

When a lessee signs a lease agreement that is for more than a year, either the Type A and Type B lease approach is taken to account for revenue, cash flows, and expenses correctly. Ultimately, both categories entail different approaches for lease accounting. In additional, the Financial Accounting Standards Board (FASB) new proposed lease standards may involve some effects on various accounting events. These events include the presentation of a company’s financial statements, interest charges, year-end reporting, financial disclosure notes, and income taxes. Leasing is an important part activity for many firms in the business

8-1: Fair value measurement provide users with financial statements that have an accurate picture of the values of a company’s assets. IFRS and GAAP both require that firms include this information regarding the fair value measurement practices in the notes to financial statements. FASB and IASB are two different accounting standards which emphasize different types of accounts and makes financial statements be prepared in a completely different way. This causes differences which in some accounts assets and liabilities are places and it can cause structural differences in the financial

The new theoretical change will increase transparency. The core principle of the new guidance is that lessees are obligated to recognize the assets and liabilities for leases with lease terms of more than twelve months, regardless of the classification as either financial or operating lease, on the balance sheet as a right-of-use asset and corresponding liability. The decision on whether lessees should consider accounting for leases on a yearly basis is fundamental and will be influenced by the management perception of the new regulations. However, it will tend to create complexity in accounting if an organization decides to account for leases for a longer period. That notwithstanding, it has to be noted that businesses have to make profits by cutting costs and this can be achieved via economy of scale

First, The International Accounting Standards Board (IASB) issues The International Financial Reporting Standards (IFRS) on U.S securities and exchange companies listed.

In the United States, Generally Accepted Accounting Principles (GAAP) outlines for accountants the acceptable practices regarding the preparation of financial statements. GAAP, developed by the Financial Accounting Standards Board (FASB) and known for being more "rules-based," specifies the presentation of financial data on the balance statement, income statement, and statement of cash flows. While certain circumstances allow for deviation from GAAP, those deviations must be disclosed. Internationally, accounting standards are under the eye of the International Accounting Standards Board (IASB) and referred to as International Financial Reporting Standards (IFRS), which is known for being "principles-based"