The International Accounting Standards Board (IASB) and the Financial Accounting Standards Board (FASB) set out to complete their ambitious goal of convergence before the year of 2015. The author provides an outline of these efforts, emphasizing the importance and ramifications of International Accounting Standards (IAS) as a means to globally improve quality and clarity of financial reporting across financial sectors. An extensive review of pertinent literature is given, visualizing the two-pronged approach of converging global accounting standards while continuing to improve the US Generally Accepted Accounting Principles (US GAAP).
As no significant agreement has been implemented since 2008, the main areas of interest to this date remain income tax, revenue recognition, leases, and financial instruments. The present work puts in perspective the roadmap by the Securities and Exchange Commission (SEC), whilst assigning pivotal roles in the harmonization process to Certified Public Accountants (CPAs) and Chief Financial Officers (CFOs). The author offers a conceptual framework and strategies for the successful completion of the convergence project, adding special emphasis on business mergers and taking a strong position on the active involvement of major players and stakeholders.
Table of Contents
1. Introduction
2. Literature Review for Worldwide Acceptance
3. Revenue Recognition and Extraordinary Items
4. Harmonization and Quality
4.1 Certified Public Accountant’s Attitudes toward Harmonization of IAS
4.2 Chief Financial Officer’s Attitudes towards Harmonization of IAS
4.3 The Quality of International Accounting Standards
5. Literature Review of Some Issues about the Transition
5.1 The Conceptual Framework Project
5.2 Convergence Efforts
5.3 Overview of Efforts
5.4 Potential Impacts of the change
5.5 More Efforts for the Convergence of Business Combinations in Phase Two
5.5.1 Modifications to American Accounting Criterion
5.5.2 Consultation
5.5.3 Step and Partial Acquisitions
5.5.4 Transparency and Comparability
5.6 Overview
5.7 Financial Performance Efforts for Convergence
6. Literature Review
7. Review Recognition
8. Outreach Efforts
9. Decisions from Efforts for July 19, 2012
10. Summary
11. Future Research Recommendations
Objectives and Topics
This paper examines the ongoing convergence process between U.S. GAAP and IFRS, aiming to identify the challenges faced by the FASB and IASB in reaching mutual agreements. It explores the reasons for the extended timeline and the critical role of stakeholder feedback in standard-setting, while evaluating potential impacts on financial reporting quality.
- Convergence strategies between FASB and IASB.
- Barriers to achieving international accounting standards.
- Stakeholder attitudes (CPAs and CFOs) toward harmonization.
- Revenue recognition and business combination challenges.
- Future recommendations for speeding up the transition process.
Excerpt from the Book
Revenue Recognition and Extraordinary Items
Revenue recognition, otherwise referred to as when the right of return exists has led to the rise of many issues with regards to whether revenue is ‘earned’ at the point where it is normally sold. What SFAS No. 48 created were the rules that would regulate unjustified diversity that already existed. Statement No. 48 clarifies how a business should go about accounting for sales in instances where the buyer is at liberty to return the product. Cash received from these kinds of transactions can only be accounted for when certain conditions stated in SFAS No. 48 are constant. In the event that these conditions are not met, revenue is not recognized.
According to Lynn & Dean (2004), accounting literature regarding revenue recognition has widely covered conceptual issues that are general and some are specific to certain industries. Some of the literature that has been written on the recognition of revenue includes the statements from the Financial Accounting Standard boards and those of the Financial Accounting Standards (SFAS) No. 45, No. 13, No. 49, Accounting for leases, statements from American Institute of Public Accountants and Financial reporting by cable Television Companies.
Revenue is only recognizable when there is the existence of persuasive evidence. Different companies have different ways of documenting sales. These methods vary depending on the type of customer, the kind of service or product being offered or sold as well as other factors that can be distinguished. Some companies may not have set rules and regulations of documenting sales, but they usually have other forms of documenting sales, sometimes written, other times electronic. These documentations, then, act as enough persuasive evidence at the point of sale.
Summary of Chapters
Introduction: Outlines the goal of transitioning from U.S. GAAP to IFRS by 2015 and the current challenges of the dual-assignment phase.
Literature Review for Worldwide Acceptance: Discusses the historical context and the commitment of American and international bodies to develop unified accounting regulations.
Revenue Recognition and Extraordinary Items: Examines the complexities of recognizing revenue when a right of return exists, citing relevant accounting standards.
Harmonization and Quality: Analyzes the perspectives of CPAs and CFOs on convergence and the general impact on reporting quality.
Literature Review of Some Issues about the Transition: Reviews the framework and ongoing efforts of the FASB and IASB in aligning financial statement presentation.
Literature Review: Focuses on the importance of revenue as a critical metric and the need for standardized recognition rules.
Review Recognition: Compares the current differences between U.S. GAAP and IFRS regarding revenue and construction agreements.
Outreach Efforts: Details the communication strategies used by the boards, including conferences and feedback sessions with stakeholders.
Decisions from Efforts for July 19, 2012: Summarizes the latest board decisions regarding performance obligations and revenue recognition modifications.
Summary: Reaffirms the necessity of the convergence project and the boards' commitment to reaching milestones before 2015.
Future Research Recommendations: Suggests increasing meeting frequency and stakeholder involvement to expedite the convergence transition.
Keywords
Convergence, U.S. GAAP, IFRS, FASB, IASB, Revenue Recognition, Financial Reporting, Harmonization, Accounting Standards, Business Combinations, Stakeholders, Financial Statements, Standardization, Auditing, Equity.
Frequently Asked Questions
What is the primary focus of this research paper?
The paper focuses on the convergence process between U.S. GAAP and International Financial Reporting Standards (IFRS), analyzing the progress, obstacles, and the roadmap set by the FASB and IASB.
What are the central themes discussed in this work?
Key themes include the convergence of accounting standards, the complexities of revenue recognition, the impact of harmonization on reporting quality, and stakeholder attitudes towards international accounting shifts.
What is the ultimate goal of the boards described in the paper?
The primary goal of both the FASB and IASB is to complete the transition and convergence process before the year 2015 to establish uniform accounting rules globally.
What scientific or research methodology is employed?
The paper utilizes a comprehensive literature review, analyzing official board reports, standards (such as SFAS and IFRS), surveys, and expert commentaries to evaluate the convergence landscape.
What topics are covered in the main body of the text?
The body covers the conceptual framework project, specific issues in revenue recognition, the impact of business combination changes, and the various outreach and feedback efforts used by the boards.
Which keywords best characterize this study?
Core keywords include Convergence, U.S. GAAP, IFRS, FASB, IASB, Revenue Recognition, and Financial Reporting.
How do CPAs and CFOs currently view the convergence process?
The research indicates mixed views: while some professionals support the competitive advantages of global reporting, many remain skeptical or concerned about transition costs, implementation quality, and the loss of familiar U.S.-specific standards.
Why does the author suggest increasing the frequency of board meetings?
The author argues that current progress is too slow and that more frequent meetings are necessary to resolve outstanding discrepancies and address stakeholder concerns more rapidly.
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- Gaberella Green (Autor:in), 2012, Convergence with Accounting Standards, München, GRIN Verlag, https://www.grin.com/document/272864
