Convergence and Conceptual Framework

Introduction 

Accounting standards involves principles and procedures that helps in defining the fundamentals of financial accounting based on different practices and policies. The Financial Accounting Standards Board (FASB) is a non-profit organization that focuses on establishing and improving the accounting standards. On the other hand, the International Accounting Standards Board (IASB) is an independent accounting body that engages in setting standards for IFRS Foundation. The two organization have a major influence on the enhancing the accounting standards through the implementation of policies and principles that are relevant within the accounting field. In a bid to enhance the accounting standards, the FASB and the IASB engaged in a memorandum of understanding with the aim of standardizing a framework that enhances various aspects of the accounting field (Tweedie & Seidenstein, 2004). The convergence of the accounting standards capitalized on addressing crucial topics that are significant in the accounting field in a bid to capitalize on effectiveness in the accounting operations.

The Convergence of FASB and IASB 

The evolving of the accounting standards resulted in the development of differences International Financial Reporting Standards and US GAAP thereby creating instabilities within the accounting field. Following the development of the issue, the FASB and IASB engaged in joint meetings in 2002 that ultimately led to issuing of a Norwalk Agreement (Carmona & Trombetta, 2010). The agreement issued focused on addressing their commitment towards enhancing compatibility of accounting standards with the aim of reducing the differences identified within the accounting field. In 2006, FASB and IASB issued a memorandum of understanding that reaffirmed their decisions to engage strategies to enhance the accounting standard within an international level. The MoU addressed their efforts that would be implemented to achieve the goals of enhancing compatibility of the accounting standards in a bid to create a standardized conceptual framework in the accounting field.

FASB and IASB Rules or Standards 

Following the convergence agreement, the FASB and IASB engage in defining principles and rules that may help in setting various standards concerning the aspects of accounting. The standards defined in this case helps in providing an avenue for the organizations to discuss various convergence topics that are relevant at the time in relations to the issues identified with the compatibility of the accounting standards. The standards identified within the MoU involved the development of high quality and common standards over time, which will capitalize on eliminating differences in the accounting policies. Secondly, the MoU focused on the aspect of making efforts to ensure that the current financial reporting standards were compatible (Schipper, 2005). Lastly, the convergence standards focused on serving the needs of the investors, which is an aspect that helps in the development of joint standards.

Accounting Theory Applied 

The main convergence topics addressed within the 2006 Memorandum of Understanding are the Business combinations and the financial statement presentation. The achievement and discussion of the topics would be necessary to enhance the accounting standards and ensure proper elimination of differences within the standards. The accounting theory applied in the discussion and analysis of the convergence theory entails the Monetary unit assumption theory. The given accounting theory capitalizes on the analysis of the dollar value by determining whether the value changes or remains constant over a given period. In that case, the accounting theory is appropriate in addressing the convergence topics based on the fact that it is appropriate for large and global companies. The theory helps in anticipating potential fluctuations, which a crucial aspect when dealing with business combination and on the presentation of financial statements (Whittington, 2008).

References

Carmona, S., & Trombetta, M. (2010). The IASB and FASB convergence process and the need for ‘concept-based’accounting teaching.  Advances in Accounting ,  26 (1), 1-5.

Schipper, K. (2005). The introduction of International Accounting Standards in Europe: Implications for international convergence.  European Accounting Review ,  14 (1), 101-126.

Tweedie, D., & Seidenstein, T. R. (2004). Setting a global standard: The case for accounting convergence.  Nw. J. Int'l L. & Bus. ,  25 , 589.

Whittington, G. (2008). Fair value and the IASB/FASB conceptual framework project: an alternative view.  Abacus ,  44 (2), 139-168.