Accounting Standards Boards PaperIn 2001, the company Enron made financial history. This energy company was warehoused in Houston, TX. Due to poor financial reporting, and theft, this company became known for its bankruptcy. Thousands of employees lost their jobs and billions of dollars were lost. This act was done by strategically planned accounting fraud. The Sarbanes-Oxley Act was also created as an outcome. However, accounting issues have gone back way before this incident.
History of IASB and FASB
Accounting dates as far back as thousands of years. Although they were not trained by any standard, there was someone who was responsible for calculating the finances of businesses. Books were written on the subject as early as the 1400s. ?In 1494, an Italian monk, Fra Luca Pacioli, wrote a book on arithmetic called Summa de Arithmetca Geometria Proportioni et Proportionalita (Schroeder et al., p. 3, 2005). People have always been curious on how much money they were making and how it was spent. For hundreds of years, a variety of groups, committees, and boards were formed to create some sort of system.
Eventually, the Financial Accounting Standards Board (FASB) was founded in 1973. Its principal purpose is to create generally accepted accounting principles (GAAP) with the public?s interest in mind. The FASB was to have members from various accounting groups instead of just one. There was one representative from the eight groups that were already formed and had special knowledge and interest in accounting (Schroeder et al., p. 10, 2005). The institution that presides over the FASB is the Financial Accounting Foundation (FAF).
The International Accounting Standards Board (IASB) was originally called the International Accounting Standards Committee (IASC) and formed in 1973 also. This organization was similar to the FASB, but was to generate principles worldwide. Originally, it consisted of nine countries. In 2001 the IASB formed and kept all the original pronouncements from the IASC. Currently, the IASB consists of 15 members with various areas of expertise.
IASB Equivalents for FASB
In 2002, the Norwalk Agreement was issued. The Norwalk Agreement is a memo of understanding that was signed between the IASB and FASB in Norwalk, Connecticut. The general idea of this memo is that both of these groups have the same plans of developing first-rate standards. They are trying to make their current standards compatible with each other as well as collaborate a plan for the future to remain compatible. A few topics on the agenda are: business combinations, consolidations, performance reporting, and revenue recognition. According to Schroeder, et al., 2005 (p. 89), both boards agree to:
1.Undertake a short-term project aimed at removing a variety of differences between U.S. GAAP and IRFSs.
2.Remove any other differences between IFRSs and U.S. GAAP that remained on January 1, 2005, by undertaking projects that both boards would address concurrently.
3.Continue the progress on the joint projects currently underway.
4.Encourage their respective interpretative bodies to coordinate their activities.
The goal of this project is to achieve compatibility by identifying common high-quality solutions.
The SEC is supportive of this idea and thinks it would be beneficial to have one set of GAAPs globally to all stakeholders. The timeline was modified as recent as February. The new plan is designed to allow more time for all parties to extensively review suggestions brought forward. The goal on the decision to use IFRS in the financial reporting system for U.S. issuers is 2011 (www.sec.gov, 2010).
The Master?s of Science in Accounting (MSA) program is defined by the University of Phoenix (UOP) as ?The Master of Science in Accountancy program helps students master the theory and principles that frame a wide range of problems and issues encountered in the accounting profession. Coursework includes accounting theory and research, accounting information systems, managerial accounting, financial reporting, auditing, taxation, not-for-profit and government accounting, forensic accounting, and accounting ethics? (http://www.phoenix.edu/programs/degree-programs/business-and-management/masters/msa/v001.html). Majority of students in this program is preparing for the CPA exam. Each state has their own specific requirements. For this reason, ?we included exam preparation software that you will use throughout your courses and when you are finished with your degree and preparing for the CPA exam? (Lindquist, 2010).
Accounting and finance is used in all businesses and industries in some way. Majority of institutions are for profit and need someone to assist in the record keeping. Another important aspect of this program is that learning teams are present in all classes. This promotes teamwork as well as brings different ideas to a situation. It is imperative that conditions dealing with money are looked at from different aspects to ensure the best outcome is selected. For this reason, the MSA program can help prepare students for future endeavors with various backgrounds.
Accounting dates as far back as the beginning of time. Although it was not structured, there was always some sort of record keeping for finances. Throughout the years, people have tried to create a system to ensure stakeholders best interest. Even with rules, it is still possible to have deception. New ideas are developing daily and laws are constantly being passed. The Norwalk Agreement started back in 2002 and is still in progress. This is a perfect example of how difficult it is to set a standard for everyone to abide by. It would be ideal for everyone to have to follow the same rules as business is conducted globally. To assist students interested in learning these practices, University of Phoenix has created the MSA program. What sets this program apart from others, CPA review material is used throughout the curriculum.
Lindquist, B., Ph.D. (2010). MSA dean?s welcome letter. University of Phoenix. Retrieved from myresource.phoenix.edu
Schroeder, R. G., Clark, M. W., & Cathey, J. M. (2005). Financial accounting theory and analysis (Eighth ed.). Retrieved from the University of Phoenix eBook Collection database