The Financial Accounting Standards Board Essay

A formal document issued by the Financial Accounting Standards Board (FASB), which details accounting standards and

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 national Financial Accounting Standards Board (FASB) and The International Accounting Standards Board (IASB) came together and jointly issued a newer revenue recognition standards. This will change the effects of the current revenue guided under US GAAP and IFRS. It will take not much of the time to be used as the date is set to have effects from 2017. All of the firms had to work under the rules and regulations set. There is enough of the time left to understand and work on the changes. On dated 28th May, 2014 the new revenue standards were issued for contracts with customers. It has the power to give limitations and new rules are to be followed by various industries. It also includes those industries which have their own policies

The Financial Accounting Standards Board (FASB) is the body in the U.S. that sets the accounting standards. These standards issued are referred to as the Generally Accepted Accounting Principles. FASB has an Accounting Standards Codification (ASC), which is a source of seeing nongovernmental US GAAP. FASB provides a Codification research system website, which can be utilized by accountants, lawyers, and students as a means to view content, perform research, and submit feedback. The goal of the Codification was to give accurate up-to-date standard-setting activity in one spot while being user-friendly by codifying all US GAAP. According to the FASB official website, “…the Codification is expected to: 1. Reduce the amount of time and effort required to solve an accounting research issue 2. Mitigate the risk of noncompliance through improved usability of the literature 3. Provide accurate information with real-time updates as Accounting Standards Updates are released 4. Assist the FASB with the research and convergence efforts (About the Codification v4.10 https://asc.fasb.org/help&cid=1176163588636).”

Leasing is a very important source of financial income for a wide range of organizations. Therefore, the way in which organizations account for leases is essential. The standards for lease accounting had been criticized for failure to meet the needs of users of the financial statements because they did not provide a reliable representation of leasing transactions (Fasb.org, 2013). In 2006, the IASB and the FASB began a joint project by creating an Exposure Draft with proposals to improve the financial reporting of leasing activities under International Financial Reporting Standards (IFRS) and U.S. Generally Accepted Accounting Principles (GAAP) in response to the criticism. On May 16, 2013 the FASB and IASB released a revised Exposure Draft proposing changes to lease accounting. The proposal aims to improve the quality and comparability of financial

According to Steve Collings (2010), the accounting treatment of leases has presented a lot of problems over the years for the particular profession. Problems are observed in the way some leases are being treated in a business’ income statement and statement of financial position. Although, as we are going to expand more on that, the major problem of accounting for leases according to Collings (2010), is the manipulation of financial statements by incorrectly categorizing ‘finance leases’ as ‘operating leases’. The main purpose of the essay is to discuss why accounting for leases has been so controversial and whether the new standard (IFRS16) will give a more meaningful picture of companies’ financial position for lessees.

According to the International Accounting Standard Board, IAS 11 provides for accounting of revenues and costs pertaining to a construction contract. Revenues from a construction contract are only recognized when the contract is complete. However, there is another possibility whereby a proportion of net income is recognized over the period of the contract which is also known as the percentage of completion method. Contract revenues usually comprise of the initial revenue as agreed in the contract and variations in contract work, claims and incentive payments. In addition, IAS 11 consists of two types of contracts which are fixed price and cost plus contracts. Fixed price contracts are contracts whereby a fixed contract price is accepted by

There are several parts of accounting that help make corporations flow smoothly and efficiently. Accounting can be used by anyone in his or her everyday life whether balancing your checkbook or checking on your income statement. In accounting there are several rules, standards, and procedures one must follow in order to maintain fairness and legitimacy. This being said there are two main frameworks that make that possible which are referred to as GAAP and IFRS. GAAP stands for Generally Accepted Accounting Principles, which refers to the accounting standards guidelines and structure for typical accounting used in the United States. IFRS stands for International Financial Reporting Standards, which is a more principle, based accounting

Inventories constitute a major portion of current assets of an entity. A primary issue in accounting for inventories is the amount of cost to be recognized as an asset and carried forward until the related revenues are recognized.

Companies create and maintain accounting systems because the accounting systems is an important role in the financial management. They bring a lot of benefits in the business management for accessing the financial statements, reporting business transactions, accounting pay and fee, and minimizing the problems with tax authorities.

The standards by which financial statements are reported are known as Generally Accepted Accounting Principles (GAAP) (Finkler, Jones, & Kovner, 2013).  The United States (US) recognizes GAAP to be a set of rules used by accountants in financial reporting (Finkler et al., 2013).  The United States-GAAP (US-GAAP) were established by the Financial Accounting Standards Board (FASB) (Finkler et al., 2013). The US-GAAP are primarily used in the US whereas many other countries have adopted their own general accounting standards known as the International Financial Reporting Standards (IFRS) (Finkler, Ward, & Calabrese, 2013). The IFRS were established by the International Accounting Standards Board (IASB) and have both similarities and differences to the US-GAAP (Finkler et al., 2013).   The purpose of GAAP are to standardize the manner in which the financial status of an organization is interpreted so financial information is useful for investors, lenders and those that an organization is accountable to or compared to (Finkler et al., 2013).

The International Accounting Standards Board (IASB) and U.S. Financial Accounting Standards Board (FASB) have been working on convergence of U.S. GAAP and IFRS since 2002, but it has been a challenging process on combining the standards between U.S. GAAP and IFRS, especially when there are two set of approaches on standards, where U.S. GAAP is rules-based and IFRS is principles-based. The U.S. GAAP is rules-based by following a set of guidelines opposed to IFRS, is principles-based by having an objectives of good reporting and provides the best judgement on the guidance to a specific circumstance. It takes a lot of effort to converge accounting standards between U.S. GAAP and IFRS, such as training personnel on the new policies and procedures, updating the accounting policies, improving a new information system, and updating internal control procedures, which you can see the reason American companies is reluctant on this transition. Just like any new updates in standards, it has its issue and difficulty as in the cost of transition, the resources to make the changes, and a period where financial reporting will be unable to have the comparability for financial statement users. Bottom line, transition is a messy process and have its complexity.

(a)On 1 January 2005,all the stock exchange listed companies in Europe adopted the International Financial Reporting Standards (IFRS) written by the international Accounting Standards Boards. According to IASB, the setting body of IFRS, their primary objective is to develop a set of high quality, transparent ,understandable, global accepted financial standards in the public interest (IFRS 2015) . Furthermore, the statement made by European Commission also explained the benefits including the elimination of barriers to international trades, the increasing of transparency and comparability of company accounts, the improvement of comprehensive strength and the rapid promotion of economic growth (Commission 2002). Based on the public

Leasing is a very important activity for organizations. Under existing accounting standards, a majority of leases’ transactions are not recorded on a lessee’s balance sheet, since only financial leases will be recorded on the balance sheet. Operating leases will only be disclosed in the notes to the financial report. The existing accounting models for leases require lessees to divide their leases as two types: finance leases (e.g., a lease of equipment or office buildings for its whole economic life) or operating leases (e.g., a lease of office space for short time, like 5 years) and to calculate for those leases in different methods. For finance leases, lessees recognise lease assets and liabilities on their balance

The conceptual Framework of the International Accounting Standards Board (IASB) was issued in 1989 by the International Accounting Standards Committee (IASC) to provide a theoretical and non-arbitrary structure to guide the development of accounting standards. The Conceptual Framework was defined by the Financial Accounting Standards Board (FASB) as a ‘coherent system of interrelated objectives and fundamentals that are expected to lead to consistent standards and that prescribe the nature, function, and limits of financial accounting and reporting ’ (Godfrey, Hodgson, Tarca, Hamilton, & Holmes, 2010, p. 94).