conceptual framework analysis. similarities & dissimilarities between FASB VS IASB...( COLLECTED)-----WORD DOCUMENT

1. IASB vs FASB

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Table of Contents
IASB:............................................................................................................................................ 04
Introduction…………………………………………………………….…………………….04
History………………………………………………………………………………………..05
IASB Timeline……………………………………………………………………………….05
. Purpose……………………………………………………………………………………….06
Structure of IASB……………………………………………………………………………06
Copnceptual Framework of IASB…………………………………………………………..08
FASB ............................................................................................................................................ 11
Introduction…………………………………………………………………………………11
History………………………………………………………………………………………11
Purpose……………………………………………………………………………………...12
Structure of FASB…………………………………………………………………………13
Conceptual Framework .............................................................................................................. 15
Similarities between FASB and IASB:...................................................................................... 16
Differences between FASB and IASB: ..................................................................................... 17
Conclusion…………………………………………………………………………………….18

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IASB
Introduction
The United States of America has a huge influence on the accounting standards in
use around the world. The USA follows the Financial Accounting Standards Board
(FASB), which has many standards that are disseminated by the international
accounting standards committees. The rest of the world follows the International
Accounting Standards Board (IASB). The IASB is head-quartered in London,
England and is an independent and privately-funded accounting standard-setter
(International accounting standards, 2010). The board consists of representatives
from nine different countries and is designed to achieve convergence in accounting
standards around the world.
International Financial Reporting Standards (IFRS) is a set of accounting standards
developed by an independent, not-for-profit organization called the International
Accounting Standards Board (IASB).
The goal of IFRS is to provide a global framework for how public companies
prepare and disclose their financial statements. IFRS provides general guidance for
the preparation of financial statements, rather than setting rules for industry-
specific reporting.

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Having an international standard is especially important for large companies that
have subsidiaries in different countries. Adopting a single set of world-wide
standards will simplify accounting procedures by allowing a company to use one
reporting language throughout. A single standard will also provide investors and
auditors with a cohesive view of finances.
Currently, over 100 countries permit or require IFRS for public companies, with
more countries expected to transition to IFRS by 2015. Proponents of IFRS as an
international standard maintain that the cost of implementing IFRS could be offset
by the potential for compliance to improve credit ratings.
History
The International Accounting Standards Board was established on April 01, 2001
to replace the International Accounting Standards Committee (IASC). The IASB is
expected to develop International Financial Reporting Standards (IFRS), which are
accounting standards promulgated after 2001, and to enforce the use of each
standard (International accounting standards, 2010). The IASC operated from
June of 1973 until April 01, 2001. It was established as a result of an agreement by
accountancy bodies in Australia, Canada, France, Germany, Ireland, Japan,
Mexico, the Netherlands, the United Kingdom, and the United States. In 1977, the
International Federation of 15 Accountants (IFAC) was established, and in 1981,
the IASC and the IFAC agreed that all standards would be completely issued by
the IASC autonomously (International accounting standards, 2006).
IASB Timeline
1966 Proposal to establish an International Study Group comprising the Institute of
Chartered Accountants of England & Wales. 1967 In February the Accountants
International Study Group (AISG) was founded. 1973 In June the International
Accounting Standards Committee (IASC) was established
1973- Between these years, the IASC released a series of standards known

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2000 as the International Accounting Standards
1997 Standing Interpretations Committee was established to consider contentious
accounting issues
2000 International Accounting Standards were finally recognized in the Stock
Exchanges around the world
2001 The International Accounting Standards Board (IASB) came into effect on
April 01, 2001
2003 The first IFRS was published in June
2005 Companies in the UK were required to present their financial
Statements using the international accounting standards adopted
by the European Union
Today, the International Accounting Standards Board (IASB) is an independent
group that consists of fifteen board members. The members are appointed by a
Board of Trustees, and by 2012, an additional board member will be added,
following a decision made in January 2009 (Members of the IASB, 2007).
Purpose
In April 2001, Framework was adopted by the International Accounting Standards
Board (IASB) to serve as a guide to the Board in developing
accounting standards. Framework has four main purposes:defining the
objectives of financial statements; identifying characteristics that make
the information useful; defining the basic elements of financial statements; and
providing concepts of capital maintenance (Summaries of international financial
reporting standards, 2010). The objective of financial statements is to provide
information on financial position, changes in financial position, and an
organization’s financial performance (The IASB framework, 2008).
Framework maintains two major assumptions about International Financial
Reporting Standards (IFRS). The first is the accrual basis which assumes that a
transaction will be recorded when it occurs, not when the cash from that
transaction is received. The second is going concern, which assumes that a
company or business entity will remain in existence for the foreseeable future
(International financial reporting, 2010).

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For many years, each country has had its own system of accounting standards and
principles; however, as many companies became international, the workload to
report financial statements multiplied. Not only were companies required to report
financial statements using their home country’s standards; but the company would
also be required to report financial statements using the standards of all countries
that were listed as exchanges (The unification of international accounting
standards, 2007).
Structure of IASB
The International Accounting Standards Board (IASB) is organised under an
independent foundation named the IFRS Foundation. The Foundation is a not-for-
profit corporation which was created under the laws of the State of Delaware,
United States of America, on 8 March 2001.
The components of the overall structure of the IFRS Foundation are set out below.
The obligations and high-level operating procedures for most components are
established under the IFRS Foundation Constitution.
St at e ofDelaware,Unit edStatesof Ameri ca,on8March2001
Group Role Formed
Governance
IFRS Foundation
Oversees the work of the IASB, the structure, and
strategy, and has fund raising responsibility.
8 March 2001
Due Process Oversight
Committee (DPOC)
Trustee committee responsible for the Trustee's
oversight function under the IFRS Foundation
Constitution.
2006
Monitoring Board
Oversees the IFRS Foundation Trustees,
participates in the Trustee nomination process, and
approves appointments to the Trustees.
1 February 2009
Technical
International
Accounting Standard
Board (IASB)
Sole responsibility for establishing IFRS 1 April 2001 (1)
IFRS interpretation
Committee
Develops interpretations for approval by the IASB,
and undertakes under tasks at the request of the
1 April 2001 (2)

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IASB
Working Group Expert task forces for individual agenda projects Formed as needed
Advisory
Accounting Standard
Advisory Forum
(ASAF)
Advises on the technical standard-setting activities
of the IASB
Announced 1
February 2013
IFRS Advisory
Council
Advises the IASB and the IFRS Foundation 25 June 2001
Specialized advisory
groups
Capital Markets Advisory Committee (4) 2003
Effects Analyses Consultative Group 2012
Emerging Economies Group 26 July 2011
Financial Crisis Advisory Group (jointly with
FASB)
30 December 2008
Global Preparers Forum
IFRS Taxonomy Consultative Group 29 April 2014
Joint Transition Resource Group for Revenue
Recognition
June 2014
SME Implementation Group (SMEIG) 2010

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ConceptualFramework ofIASB
The revised Framework distinguishes between two types of qualitative
characteristics that are necessary to provide useful financial information:
• Fundamental qualitative characteristics (Relevance and faithful representation)
And
• Enhancing qualitative characteristics (comparability, timeliness, verifiability
And understandability)
Fundamental qualitative characteristics:
1. Relevant financial information is capable of making a difference to the
decision made by users. In order to make a difference, financial
information has predictive value, confirmatory value or both.

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The revised Framework carries forward the notion of materialityas an element of
‘relevance’. However, the Boards have clarified that materiality is an entity-
specific aspect of relevance based on the nature or magnitude of items to which the
information relates, which cannot be specified in general terms to encompass
every situation.
2. Faithful representation replaces the previously used term ‘reliability’, as
the Boards determined there is a lack of common understanding of
reliability. Financial information that faithfully represents economic
phenomena has three characteristics: it is complete
it is neutral
free from error
The revised Framework acknowledges limitations in achieving a faithful
representation, e.g., due to inherent uncertainties, estimates and
assumptions. Accordingly, financial information might not always be
entirely free from error. Faithful representation, however, is achieved if
no errors or omissions affect the description of economic phenomena
and the process applied to producereported information has been selected
and applied without errors.
Enhancing qualitative characteristics
Comparability, timeliness, verifiability and understandability are directed to
enhance both relevant and faithfully represented financial information.
Those characteristics should be maximized both individually and in combination.
1. Comparability enables users to identify similarities and differences among
items, both between different periods within a set of financial statements and
across different reporting entities. Consistent application of methods to
prepare financial statements helps to achieve comparability.
2. Verifiability is a new concept in the revised Framework. Financial
information is verifiable when it enables knowledgeable and independent
observers to reach a
consensus on whether a particular depiction of an event or transaction is a
faithful representation.

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3. Timeliness of financial information is a qualitative characteristic under the
existing framework. However, rather than stressing the balance between
timely reporting and reliable information, the revised Framework refers more
broadly to timeliness as being able to influence decision makers
4. Understandability has been carried forward from the existing Framework.
Financial information that is classified, characterised and presented in a clear
and concise way is understandable.

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In
FASB
Introduction
The FASB's mission is "to establish and improve standards of financial accounting
and reporting that foster financial reporting by nongovernmental entities that
provides decision-useful information to investors and other users of financial
reports." The FASB accomplishes its mission "through a comprehensive and
independent process that encourages broad participation, objectively considers all
stakeholder views, and is subject to oversight by the Financial Accounting
Foundation's Board of Trustees."
The Financial Accounting Standards Board (FASB) is one branch of the Financial
Accounting Foundation(FAF), an independent, nonprofit corporation currently
based in Norwalk, Connecticut. The Financial Accounting Standards Board bears
responsibility for establishing generally accepted accounting principles (GAAP)
for the private sector.
History
The impetus for the Financial Accounting Standards Board dates back to the
economic boom of the 1920s, the stock market crash of 1929, and the Great
Depression that followed. By the mid-1930s, both the financial community and the
federal government had responded to the obvious need for uniform accounting
standards, particularly for the of corporations. The New York Stock Exchange and
what is now the American Institute of Certified Public Accountants ventured
preliminary guidelines in the jointly published Audits of Corporate Accounts of
1934. The congressional Securities Act of 1933 and the Securities Exchange Act of
1934 threatened to supersede such efforts by establishing the U.S. Securities and
Exchange Commission (SEC), which was authorized, among other functions, to

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prescribe standards for the preparation of financial reports. In 1938, however, the
SEC voted to forgo this prerogative and allow the private sector to regulate its
accounting practice—a policy that the commission has maintained to date.
The AICPA's committee on acc procedure (CAP) assumed the financial accounting
standard-setting role in 1939. The AICPA shifted this responsibility to its acc
principal board equipped with its own research staff, in 1959. Even so, the APB's
main contribution— Basic Concepts and Accounting Principles Underlying
Financial Statements of Business Enterprises, published in 1970—was criticized as
achieving too little, too late. In 1971, a special committee of the AICPA suggested
that the association turn over the standard-setting role to an autonomous body. In
1973, therefore, the Financial Accounting Standards Board within the Financial
Accounting Foundation was established. Soon thereafter, the SEC ratified the
FASB's role in promulgating financial accounting and reporting "principles,
standards, and practices."
Purpose
The Financial Accounting Standards Board is responsible for establishing,
updating, clarifying, and publishing both the broad principles and the specific
practices that constitute acceptable private-sector financial accounting. Individual
businesses, accounting and industry associations, and government agencies, among
other sources, request findings from the FASB on issues ranging from the
consolidation of subsidiaries to post-employment benefits. The FASB operates
through a process of research projects, discussion memoranda, public hearings,
comment letters, and proposal drafts. The FASB's ultimate findings on agenda
items are published as Statements of Financial Accounting Standards, which
businesses are required to adhere to. As of 1999, there were on record 134 such
statements, some of which had been subsequently amended or superseded.
An extensive research and technical staff, along with special task forces generally
appointed by the chair, assist the FASB in its standard-setting function. The
Financial Accounting Standards Advisory Council (FAS AC), a separate branch of
the FAF, routinely advises the FASB on fulfilling its complex mission, particularly
in the setting of agenda priorities. For public-sector accounting, the FASB and the
FASAC are complemented within the FAF by the Governmental Accounting
Standards Board (GASB) and the Government Accounting Standards Advisory
Council (GASAC). Pronouncements by various government agencies (particularly

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the SEC) and professional bodies (particularly the AICPA's Accounting Standards
Division) also supplement the work of the Financial Accounting Standards Board.
Structure of FASB
The Financial Accounting Foundation's 16-member board of trustees appoints the
chair and members of the Financial Accounting Standards Board. For the sake of
efficiency, the FASB is restricted to seven members. These board members are
drawn from the professional community of certified public accountants; financial
analysts, executives, and educators; and government bureaucrats. To ensure
objectivity, members are employed exclusively by the FAF at professional salaries,
and are subject to strict conflict-of-interest standards (including the termination of
all prior business affiliations). Board members serve staggered five-year terms, and
may be reappointed for a consecutive term.
The Financial Accounting Foundation (FAF) is a nonprofit organization that
comprises the Financial Accounting Standards Board (FASB). The structure of the
FAF is outlined below.
The Fi nancial Accounti ngFoundat ion(FAF)i sanonpr of it or ganizat ionthat compr isestheFinanci al Account ingSt andar dsBoar d(FASB). Thestr uctureof theFAFi soutl inedbelow.
Group Role Formed
Governance
Financial Accounting
Foundation(FAF)
Oversees the work of the FASB, GASB, and their advisory
councils — structure, strategy, administration, and
finances.
1972
Technical
Financial Accounting
Standard Board(FASB)
Establishes standards of financial accounting and reporting
for private-sector entities, including business and not-for-
profit organizations.
1973
Government Accounting
Standard Board(GASB)
Establishes standards of financial accounting and reporting
for state and local governmental entities.
1984
Emerging Issues Task
Force(EITF)
Assists the FASB in improving financial reporting through
the timely identification, discussion, and resolution of
financial accounting issues.
1984

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Private Company Council
(PCC)
Determines alternatives to existing nongovernmental U.S.
GAAP to address the needs of users of private company
financial statements, based on criteria mutually agreed
upon by the PCC and the FASB.
2012
Advisory
Financial Accounting
Standards Advisory Council
(FASAC)
Consults with the FASB on technical issues, project
priorities, and other matters likely to concern the FASB.
1973
Governmental Accounting
Standards Advisory Council
(GASAC)
Consults with the GASB on technical issues, project
priorities, and other matters likely to concern the GASB.
Selected advisory groups
Investor Advisory Committee (IAC) 2007
Not-for-Profit Advisory Committee (NAC) 2009
Small Business Advisory Committee (SBAC) 2004
Joint Transaction Group
for Revenue Recognation
Consults with the FASB and IASB on implementation
issues when applying ASC 606 and IFRS 15.
2014

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Conceptual Framework
FASB and the International Accounting Standard Board are working closely
together to develop a common Conceptual Framework. The goal is develop
standards that are objectives-based, internally consistent, and internationally
converged. Currently Statement of Financial Accounting Concepts No. 8
“Conceptual Framework for Financial Reporting” is being used in the United
States. The Conceptual Framework include: measurement attributes used to
measure and report economic transactions, events, and arrangements in financial
statements; and accounting principles and assumptions that guide recognition, DE
recognition, and disclosure, as well as the classification and presentation of
information in financial statements.
Fundamental qualitative characteristics, relevance and faithful representation allow
for decision usefulness. Information that is capable of making a difference in
decisions made by financial statement users is relevant. The three components of
relevance are:
 Predictive Value – information that should help users form expectations
about the value
 Confirmatory Value – information that provides feedback to confirm or
correct prior predictions and expectations
 Materiality – refers to the nature and magnitude of an omission or
misstatement of accounting information that would influence the judgment
of a reasonable personrelying on that information
Faithful representation is when the words and numbers accurately predict the
economic substance of what they purport to represent. The three components of
faithful representation are:
 Complete representation – provides a user with full disclosure of all
information necessary to understand the information being reported, with all
necessary facts, descriptions, and explanations

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 Neutral representation – not biased, slanted, emphasized or otherwise
manipulated to achieve a pre-determined result or to influence users’
behavior in a particular direction
 Free from error – the information is measured and described as accurately as
possible, using a process that reflects the best available input
Similarities betweenFASB and IASB
An important similarity between Generally Accepted Accounting Standards
(GAAP) and International Financial Reporting Standards (IFRS) is the manner in
which they recognize stock-based compensation. The model followed by both
Boards maintains that the fair value of shares and options available as
compensation to employees should be recognized over the employees’ service
dates (Putra, 2009). On May 23, 2002, the International Accounting Standards
Board (IASB) issued the Preference to International Financial Reporting
Standards, which addresses the Board’s due process for developing and issuing
IFRS. The due process is very similar to the FASB’s due process, which involves
accountants, financial analysts, and other users of financial statements (Gornik-
Tomaszewski & McCarthy, 2003). In April 2004, both the Financial Accounting
Standards Board

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(FASB) and the International Accounting Standards Board (IASB) agreed to
combine their projects on the reporting and classification of items of revenue,
expenses, gains, and losses. This agreement led both Boards to examine the
presentation of information in the financial statements (The unification of
international accounting standards, 2007). A further similarity of both Boards
states that equity-like instruments giving the holder rights to demand cash
settlements must be classified as liabilities (Epstein, 2008). Figure 3 illustrates the
agreement regarding the reporting of financial information for both GAAP and
IFRS that was implemented on June 30, 2008.
Differences betweenFASB and IASB
There are both minor and major differences between the Financial Accounting
Standards Board (FASB) and the International Accounting Standards Board
(IASB). Some minor differences are as follows: The FASB came into existence in
1973 and is based in the United States, while the IASB was established on April
01, 2001 and is based inLondon, England. The FASB replaced the Accounting
Principles Board (APB) and the Committee on Accounting Procedure (CAP),
while the IASB replaced the International Accounting Standards Committee
(IASC). Additionally, the FASB is a non-profit organization that develops
Generally Accepted Accounting Principles (GAAP), while the IASB
develops International Financial Reporting Standards (IFRS) (Differences between
IASB and FASB, 2009).
One specific example of the differences is that the International Financial
Reporting Standards (IFRS), produced by the IASB, prohibits the use of Last-In-
First-Out (LIFO) for inventory purposes (The unification of international
accounting standards, 2007). LIFO is an asset-management and valuation method
that assumes that all assets acquired last are the ones that are used, sold, or
disposed of first. Selling an asset for less than its initial cost constitutes a capital
loss; selling an asset for more than its initial cost constitutes a capital gain. Using
LIFO to manage inventory can be tax advantageous but may also increase tax
liability
Another concept the IFRS prohibits is the use of extraordinary items. Because this
has been prohibited, the way earnings per share EPS) are reported on income
statements is quite different. These differences affect the way investors, analysts,
creditors, government agencies, and businesses analyze financial statements (The
unification of international accounting standards, 2007). Although the calculation
of EPS between the two Boards is similar, there are some minor differences. While
GAAP gives companies a choice between whether to settle contracts in either cash

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or shares, IFRS requires companies to settle contracts with shares only (Putra,
2009). A further major difference between IFRS and GAAP are characteristics
defining equity and debt. GAAP requires entities to reassess whether an embedded
derivative should be separated at the end of each reporting period, while IFRS only
requires this if there is a change in the terms that significantly modifies the cash
flows. Also, GAAP requires non-current presentation of defaulted debt if a waiver
is granted before the settlement issuance date, while the IFRS requires this after the
balance sheet date only (Epstein, 2008). GAAP allows convertible debt to be
recorded as long-term debt; while the IFRS records convertible bonds separately
into the equity componentand the debt component,
Why the US Should Not Adopt IFRS
Although the Securities and Exchange Commission (SEC) believes in making the
United States follow the IASB and IFRS, the majority of American business
people do not share this belief. In 1999, the FASB conducted a study which
concluded that FASB is not a lower quality standard than IFRS. According to
Yohn, GAAP is just as good, if not better, than the IFRS and many believe that
there is no reason to switch now. According to Coffee, European scandals are very
different than American scandals due to significant differences in ownership
structure; therefore, the IASB and IFRS will not work as well as the FASB and
GAAP (The Accounting onion: top ten reasons why us adoption of IFRS is a
terrible idea, 2008). Another negative aspect in changing to IFRS from GAAP is
the possibility that market values for stocks and bonds would go down drastically
(Albrecht, 2008). The Securities and Exchange Commission (SEC) originally
Called for improvements to funding and governance of the IASB; however, in
most recently released statements, the SEC has stated that the IFRS is highly
inadequate. According to MIT and Wharton professors, the United States economy
and capital markets will not be served well by the IFRS because different countries
have different goals with respectto financial reporting regulations (McKay, 2009).
CONCLUSION
Though both the IASB and the FASB have the goal of establishing accounting and
financial reporting standards, the FASB focuses on accounting standards in the
United States, while the IASB focuses on global standards. Since many companies
operate businesses globally, the IASB and the FASB often work together, with

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both entities contributing toward global accounting standards. The FASB also sets
standards and rules for individual certified public accountants practicing in the
United States.