The US Financial Accounting Standards Board (which issues the U. S. Generally Accepted Accounting Principles) and the International Accounting Standards Board (which produced the International Financial Reporting Standards) signed a Memorandum of Understanding in 2002 aiming to provide a joint effort in aligning the two standards. The IASB said that the parties were developing compatible standards that can be utilized for domestic and cross-board reporting of financial results (IASB, pp.
2, 2005). In April 21, 2005, the Securities and Exchange Commission confirmed that its chairman, William Donaldson, met with Charles McCreevy, European Union Market Commissioner and confirmed the agency’s support for the proposed convergence.
As part of the convergence, the SEC mulled on eliminating the current requirement that non-SEC registrants in accordance with U. S. GAAP.
The SEC considered allowing these firms to submit financial statements that comply with International Financial Reporting Standards, which is required in the European Union. The SEC forecast, at that time, that they will be able to eliminate the US GAAP reconciliation prerequisites by 2009.
This was in light of the progress in reduction of the disparities between U. S. GAAP and IFRS. The IASB said in 2005 that the projects that have been completed included: i. Share-based Payment.
ii. Inventories iii. Asset exchanges iv. Voluntary change in accounting policies v. Discontinued activities, specifically on assets sold, and classification of discontinued operations vi. Depreciation of idle assets or those held for disposal. The IASB acknowledged that issues that the two accounting boards continue to be divergent include (i) business combinations, (ii) costs related to disposal or exit activities, (iii) income taxes, and (iv) segment reporting (IASB, page 5, 2005).
The IASB pointed to a May 2006 commentary in Financial Times by Tommaso Padoa-Scioppa, who said that given that financial markets around the world are integrating, the differences in accounting methods impose an increasing problem on economic efficiency and making cross-border comparisons costly (par. 3, 2006). According to Mr. Padoa-Scioppa, the convergence process has to be implemented, despite arguments against it, to improve inter-border access to financial markets.
👋 Hi! I’m your smart assistant Amy!
Don’t know where to start? Type your requirements and I’ll connect you to an academic expert within 3 minutes.get help with your assignment