Background. The objective of this project is to eliminate a variety of differences between International Financial Reporting Standards and US GAAP. The project, which is being done jointly by FASB and IASB, grew out of an agreement reached by the two boards in October 2002 (the ‘Norwalk Agreement’).

Why do the FASB and IASB require a common conceptual framework?

IASB and FASB embarked a project to develop a common conceptual framework that is both complete and internally consistent. A primary motivation for the joint project is to converge the frameworks of the two boards in order to provide a consistent intellectual foundation for the convergence of the two sets of standards.

Is GAAP going away?

Had the anticipated move come about, U.S. Generally Accepted Accounting Principles (GAAP) would have been abandoned. The switch, however, never happened. Now SEC Chairman Jay Clayton has announced that a consideration to require or allow U.S. public companies to use IFRS is “not a focus” for him.

Do we still use GAAP?

Its accounting standards are no different; to date, it continues to use its own Generally Accepted Accounting Principles and have yet to converge to the International Financial Reporting Standards (“IFRS”) as set by the International Accounting Standards Board.

What does IASB stand for?

International Accounting Standards Board
The International Accounting Standards Board (IASB) is an independent, private-sector body that develops and approves International Financial Reporting Standards (IFRSs). The IASB operates under the oversight of the IFRS Foundation.

What is the purpose of the FASB conceptual framework?

A purpose of the conceptual framework is to assist standard setters in developing and revising accounting standards.

Why did the FASB develop a conceptual framework?

The main reasons for developing an agreed conceptual framework are that it provides a framework for setting accounting standards, a basis for resolving accounting disputes, fundamental principles which then do not have to be repeated in accounting standards. From 1978 to 2010 the FASB released eight concept statements.

What are the disadvantages of GAAP?

The following are the most common limitations that may arise when using GAAP:

• GAAP is not global. The generally accepted accounting principles are not globally recognized as the standard for preparing financial reports.
• One-size-fits-all approach.
• Long wait times for new standards.

Why does America not use IFRS?

As the SEC’s purpose is to protect investors in US companies, especially US investors, they have shown some resistance to the adoption of IFRS. The SEC cites IFRS’s lack of consistency and believes IFRS is underdeveloped when it comes to small-scope issues in reporting.

Why did Canada switch from GAAP to IFRS?

International financial reporting standards (IFRS) are being adopted as generally accepted accounting principles (GAAP) in Canada, in response to market pres- sure to improve financial reporting comparability.