Question

What are your thoughts about the future of accounting standards and regulation in general?

Answer 1

since 2002,the financial accounting standards board and international accountings standards board have been working on converging u.s. generally accepted accounting principles and intrnational financial reporting standards.they have been successful and failures along the way, but now the convergence effort appears to have run it course.going forward,u.s.standard setters propose an informal,collaborative model that will minimize difference in financial reprting,here is an overview of global accounting standards-past present and future.

In 2002,FASB and the IASB agreed to quickly develop a single set of high-quality,compatible accounting standards that could be used for both domestic and cross border financial reporting.the goal of the norwalk agreement was to remove individual differences between u.s. GAAP and IFRS in order to improve the consistency and comparability of financial statements worldwide.

convergence provide difficult,however.the standard setters could not agree on what is best for stakeholders,and the approval process took much longer than anticipated. eventually , the boards' effort focused on four specific joint projects;revenue recognition,insurance,financial instruments and leases. of the four projects , revenue recognition stands out as a success story.a major global standard communicated under u.s. GAAP in accounting standards update no. 2014-09,revenue from contracts with customers goes into effect for reporting periods beginning after dec.15,2016,for public companies

In theory, the new guidance standardizes and simplifies the revenue recognition process for customers contracts across different industries and geographic locations.but many companies are uncertain about how to apply the new standard.so far,the AICPA has established 16 industry specific task forces to help companies implement the new rules.

conversely ,convergence projects on insurance and financialassets have failed.the boards have resigned themselves to producing different standards ,and FASB spokesperson said, 'when standards for convergence do not represent an improvement to u.s. GAAP,WE MUST DO WHAT WHAT WE BELEIVE IS IN THE BEST INTRESTS OF INVESTORS WHO USE IT.'

THE LEASE PROJECTS REMAINS THE ONLY OUTSTANDING CONVERGENCE PROJECT.ACCOUNTING FOR LEASE IS NOT ONLY COMPLEX,BUT ALSO INCONSISTENT ACROSS THE GLOBE.WHEN COMPANIES RENT SUCH ITEMS AS REAL ESTATE OR EQUIPMENT,EXISTING ACCOUNTING STANDARDS LARGELY PERMIT THEM TO KEEP LEASE EXPENSES OFF THEIR BALANCESHEET,THEREBY HIDING MASSIVE ABILITIES. FINAL LEASE RULES COULD BE RELEASED IN 2015,

LOOKING TOWARDS THE FUTURE-THE CONVERGENCE FAST TRACK THAT FASB AND THE IASB ENVISIONED IN 2002 MAY HAVE BEEN OVERZEALOUS.AFTER MORE THAN DECADE,CONVERGENCE EFFORTBETWEEN FASB AND THE IASB APPEAR TO HAVE STALLED.

ALTHOUGH A UNIVERSAL SET OF OF ACCOUNTING RULES WILL NOT HAPPEN ANYTIME SOON ,THE BOARDS ARE EXPECTEDTO CONTINUE TO WORK TOGETHER TOWARD GREATER COMPARABILITY.AS MORE COMPANIES ENGAGE IN FOREIGN OPERATIONS AND MORE STAKEHOLDERS INVEST IN GLOBAL MARKETS ,FINANCIAL STANDARDS COULD GRADUALLY ALIGN IN RESPONSE TO MARKET DEMANDS.