Question

The differences and similarities between FASB and IASB frameworks

Answer 1

IASB stands for International Accounting Standards Board and this board issues the standards for foreign companies listing on U.S. securities exchanges. IASB follows International Financial Reporting standards which is a much more flexible, principle-based set of standards for financial reporting. IFRS is used in over 115 countries and there is much debate as to if the U.S. should adopt these standards as well. FASB stands for Financial Accounting Standards Board and is a market regulator whose purpose is to set the accounting and financial reporting standards for the U.S. FASB standards are known as Generally Accepted Accounting Principles (GAAP) The FASB and IASB both are Foundations that provide oversight, a Board, an Advisory Council and an Interpretations Committee. While they both have very different ideas of how financial statements should be reported, they both have the best interest of the public in mind. Additionally, they both are working together in that hopes to someday have a convergence to make financial reporting more uniform throughout the world.

Similarities:

-Both require the use of fair value accounting for financial assets

-Both are private organizations

-Framework in terms of administration are the same, both have a Board, Advisory Council, and an Interpretations Committee

-Both are trying to find a middle ground for the best interest of the public

-In favor of collaboration on projects and other areas of work

Differences:

-IASB issues IFRS, while FASB issues U.S. GAAP

-FASB is overseen by the SEC, while IASB is regulated by IOSCO

-FASB has a more rules-based system (GAAP), while IASB has a more flexible principles-based system for financial reporting standards (IFRS)

-IASB and IFRS are used

-IFRS favors a control model while GAAP favors a risk and rewards model

-Income statement looks different, GAAP shows extraordinary items below net income while IFRS does not segregate them on income statement

-IFRS uses LIFO for their inventory system, while GAAP allows the company to choose whether they want to use LIFO or FIFO

-Development costs can be capitalized under IFRS, while under GAAP they are considered expenses

-The documents included in the financial statements are not the same, GAAP provides a Statement of Comprehensive Income in addition to their Balance Sheet, Income Statement, Changes in Equity, Cash Flow Statement and Footnotes

-IFRS requires separation of current and non-current assets and liabilities on the Balance Sheet, GAAP or recommends their separation