Difference Between Fasb and Iasb Essay

Major similarities between FASB and IASB: Same organizational structure FASB and IASB are each belongs to an organization that has four main bodies. Also, the internal structure and responsibility assignment of these organizations are basically the same. FASB and IASB are the standard setting board of the organizations. Other three parts of the organizations are there to support the standard setting process, such as selecting board members and deal with emergency issues (Kieso, et al. , p7-9). In addition, both boards have members from varies industries including accounting, finance, business and academia (Virginia Law & Business Review, fall 2008, p283). Private entities Both boards are private entities that have been assigned the role and responsibility of developing and deploying Accounting Standards (Virginia Law & Business Review, fall 2008, p284). By private, it means the standard setting process is not affected by politics. However, since the governments are also relying on standard set by these private institutions, both FASB and IASB are sensitive to politics to varies degree. Similar procedure of making rules Despite any internal and external influences, the procedure of drafting and publishing Generally Accepted Accounting Principles (GAAP) and International Financial Reporting Standards (IFRS) are similar. Generally, the process is as follows: discuss whether to add new project to agenda mostly based on recommendations from investors; plan for the project; draft the standard; vote and publish the standard once it is approved(FASB: Financial Accounting Standards Board, n. d). However, since each board has different members and they are setting rules based on its own investor’s concern, also by other external influences, they produce distinct rules. Differentiations between FASB and IASB: Scope of operations The jurisdiction of the IASB could be the whole world of commerce and industry, include EU nations and states, the latter is confined mainly to the United States and its trade partners (Virginia Law & Business Review, fall 2008, p303). Because of this, the citizenship of the trustees has become a problem. The IASC Foundation has huge pressure of balancing the culture background of the board member; nevertheless, European members are still the majority of the board with a proportion of nearly 50% (Virginia Law & Business Review, fall 2008, p307-308). This problem shows that the IASB standard setting has more outside interference. Political settings Different political settings for FASB and IASB authorized them different degree of independence. In the US, the standards set by FASB are implemented unless the Securities and Exchange Commission (SEC) interferes and prevents it for being accepted. However, in the case of IASB, standards set by the IASB do not gain value and authority unless these are passed by the European Commission (EC) (Virginia Law & Business Review, fall 2008, p291). Funding The FASB is now financed through an obligatory contribution system, and therefore sheltered against financial influence. The IASB is financially depending on noncompulsory contribution from financial institutions, thus there is relatively huge financial pressure on IASB. Recently IASB has taken significant steps to widen the source of funding but the degree of mprovement varies from countries (Virginia Law & Business Review, fall 2008, p292-298). Which approach to support? I would like to say the FASB standard setting approach is more appropriate considering your accounting background. Since many of your clients are Fortune 300 companies who would find FASB more in harmony with their preparation and presentation of periodic accounting statements and records. FASB is also in line with most widely accepted accounting norms and practices in the US. With less external influence, more freedom in standard setting and sufficient funds, I believe the FASB standard setting process is more trustworthy.