Merger of the FASB and IASB

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Dr. Steven Hall Accounting 5312 29 June 2014 The Merger of the Financial Accounting Standards Board and the International Accounting Standards Board The proliferation and evolution of international trading and commerce have not only opened the gateway to international markets for many of the world’s emerging economies, but they have also fostered an unprecedented growth in the number of multinational corporations. Spurred by trade agreements such as the North American Free Trade Agreement (NAFTA) and the World Trade Organization (WTO), the rapid expansion of global commerce has revealed many inherent obstacles and risks within the international financial structure. Disparate political, ethical, economic, and legal policies have…show more content…
The IASB and the FASB have both established frameworks for the reporting of financial information, however, despite their apparent similarities several key differences exist between their structures. For example, U.S. GAAP has been traditionally defined as being a more rules-based standard, which has established strict guidelines and contingencies for reporting financial information. Given its history and the recent tumultuous financial environment, particularly the 2008 financial crisis, U.S. GAAP has become a very robust and strictly enforced set of standards. This has given rise to concerns that some preparers of financial statements may commit accounting fraud by circumventing or manipulating the rules of U.S. GAAP. Supporters of IFRS argue that “the more detailed the guidance, the greater the opportunity to find the loopholes in the guidance” (Hillman, Heaston, and Dodd 5). Despite these concerns, however, U.S. GAAP continues to be the preferred standard of most accounting professionals. Conversely, IFRS is a principles-based standard. The principles-based approach of IFRS grants management the discretion to use different accounting methods when preparing financial data. While this practice is praised for its focus on fair values and the freedoms it provides managers, it is often criticized for being far too subjective and inviting “a human element that could increase the risk of financial
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