The Financial Accounting Standards Board

581 Words2 Pages
Convergence The Financial Accounting Standards Board (FASB, 2012) believes that convergence of US generally accepted accounting principles (GAAP) with international financial reporting standards (IFRS) is necessary because business worldwide would benefit from having a single set of high quality international accounting standards. This would make it easier for cross-border financial reporting. The FASB makes the claim that it would help with domestic reporting but that seems counterintuitive and the FASB does not back up this claim with evidence. Ultimately the benefit is that companies only deal with one set of standards worldwide and that investors worldwide are able to make sound investment decisions about different companies as a result. Fair Value vs. Historic Costing Historic cost accounting means "requiring all financial statement items be based on original cost" (Thompson, 2007). Fair value reporting means that the financial statement item is recorded based on its current value. In general, fair value reporting would only apply to derivatives and other assets with similarly fluctuating market values. However, it could be applied to things like fixed assets or inventories as well. Cost accounting accommodates for fluctuating market values in other ways, for example writedowns for inventory or allowances for receivables that are not expected to be paid. GAAP Historic cost accounting is part of GAAP. Fair value accounting is only allowed for certain items. For
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