As an accounting professional, it is important to understand the historic development of accounting standards and specifically topics that are affected by the convergence of existing standards. Look at the combined work of the FASB and the IASB has led to a standardized framework. Throughout the development of this framework, several areas of accounting have evolved. Consider the historical development of the conceptual framework and how final assenting and dissenting opinions of rule-making boards impacted the development of the conceptual framework.
Select two convergence topics from the 2006 Memorandum of Understanding (and the 2008 progress report) and analyze how the convergence of FASB and IASB rules or standards have developed to create to a common framework as outlined in the Conceptual Framework Project. In addition, include aspects of accounting theory that are being applied in the topics selected.
The first convergence topic you should consider is the development of SFAS 159. This standard allows at the option of the reporting entity, the measurement of a wide range of financial assets and liabilities at fair value. The SFAS 159 permits election of fair value measurement on a contract-by-contract basis, but the election should be supported by documentation or preexisting documented policy. The SFAS 159 requires explanation of management rationale where fair value is elected for only part of a group of similar eligible instruments. This is a principles based initiative and the discretion allowed to firms can adversely affect the comparability and consistency of financial statements (b). The convergence between IASB and FASB standards has the formulation of SFAS 159 an important event. Even though the application of SFAS 159 will be affected by differences in reporting objectives, analysis, and management intention, the standard has been launched with the creation of public awareness about it. Even though the standard makes comparability of financial statements difficult, this is the first step ...
Accounting standards relating to fair value are discussed step-by-step in this solution. The response also has the sources used.