FASB codification system Essay

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The FASB/IASB Convergence Project

Accounting 5381

Introduction
The quick development of the global economy since the last century has called for the need of one high-quality set of accounting standards and financial reporting systems that companies can use worldwide. In the last decade, the Financial Accounting Standards Board (FASB) and International Accounting Standards Board (IASB) have been working together to determine the solution for that demand. While the original mission of FASB is to develop the U.S. to generally accept accounting principles (GAAP), the IASB works on International Financial Reporting Standards (IFRS) which are designed to improve the common of the accounting systems over the world. With the growing of many international corporations and also the international trade and shareholding, the U.S. government recognized the benefit from internationally converged accounting standards (Garmong 2012). Thus, in 2002 FASB and IASB signed the Norwalk Agreement to start the convergence project under the directives of U.S. Securities and Exchange Commission (SEC).
The paper will discuss the origin and the progress of the convergence between the FASB and the IASB’s accounting standards. While the FASB is the standard setter of the U.S. with 40 years of experience under the regulation of the SEC, the IASB represents the cooperation of many countries around the world. While the two accountings standards share many similarities, they have many major discrepancies that required companies to take significant effort to reconcile. This created an urgent demand for the convergence of the two standards into one common international accounting standard. Accordingly, the convergence project had made rapid progress and could be finished in the near future, according to the Roadmap proposed by the SEC. The convergence project had achieved most of its milestones on the agenda, and is expected to complete in 2013.
Financial Accounting Standards Board
The Financial Accounting Standards Board (FASB) is a part of the Financial Accounting Foundation (FAF), an American nonprofit corporation. The mission of FASB is carried within its name, which is establishing standards of financial accounting to set the rule for financial reports of nongovernment entities. Those standards nowadays become a very important economic foundation which is known worldwide as generally accepted accounting principles (GAAP) for the private sector. (“Financial Accounting” 2000)
Foundation of FASB
The FASB has a history of 40 years and it was created for the following reasons. Back in the economic crisis of the 1920s, after the stock market crashed in 1929, their was a need to uniform financial reports, special for publicly traded companies, became significantly. In the early 1930s, the U.S. Securities and Exchange Commission (SEC) was authorized to set standards for financial accounting and financial reports. In 1939, the American Institute of Certified Public Accountants (AICPA) again stated the important role and the need of financial accounting standard in its Committee on Accounting Procedure. Nonetheless, not until 1959, the AICPA required its Accounting Principles Board (APB) to do research on this issue. The APB then published Basic Concepts and Accounting Principles Underlying Financial Statements of Business Enterprises in 1970 that was not very efficient (source 1). Finally, in 1973 the FASB was established as an independent organization which responds for formulating and publishing standards of financial accounting and reporting for the private sector. Since 1973, the FASB has set the rules and guidelines for publicly held organizations in reporting financial information in manner to serve the interest of investors, creditors, and government agencies (Dodd et al. 2008).

Structure, function and mission
The FASB have seven members who are charged by board member of the FAF. Each FASB board member is…